17 Mar The RBA hikes again on the back of the boost to inflation from the Iran War
Key Points:
- The RBA hiked its cash rate for the second time this year by another 0.25% to 4.1% in response to inflation running above target and the War with Iran likely to boost it further.
- A further rate hike is highly possible, but the longer the conflict persists the greater the risk that the inflation shock will turn into an output shock.
- As such our base case is for the RBA to leave rates on hold at its May meeting.
- The best thing the Government can do to help alleviate underlying inflation pressures is to lower the level of public spending and introduce reforms to help boost productivity.
