Inflation is now surging in Australia and that surge is spreading well beyond the impact of soaring commodity prices. We therefore think the RBA needs to begin tightening policy. The RBA might want to avoid politicising its decision and wait until after the federal election in May. But with a number of politicians voicing their opinion on rate hikes, the RBA should demonstrate its independence by ignoring the politics and focusing on the economic data. We now think the Bank will kick off its hiking cycle with a 15bp hike in May.
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