Economists might be predicting an interest rate cut or two in the latter half of the year, but the International Monetary Fund (IMF) has called on the Reserve Bank to push rates in the other direction.
In its latest report on Australia, the global body pointed to persistently high inflation as a key concern that needs to be addressed with higher rates, although it said the overall economy was in a strong position.
“Monetary policy should be tightened further to ensure inflation comes back to target earlier than 2026 projected in the baseline,” the report states.
“The pace of further tightening needs to be calibrated based on incoming data and should consider the lags in the transmission of the effects of monetary policy.”
The report, while released today, was completed on December 4 – after the RBA’s decision to hike rates to 4.35 per cent on Melbourne Cup day but before ABS data last week revealed lower-than-expected inflation for November.
Those figures put annual inflation at 4.3 per cent – the slowest it had been since January 2022.