Australia’s Reserve Bank (RBA) meets on Tuesday and, although it is a close call, will probably lift the cash rate again by 25bp to 4.50%. This is now the markets’ view too. The economy is moving from recovery into a boom period at a time when spare capacity is already tight and the unemployment rate is relatively low. Measures of underlying inflation also appear to be bottoming out at a pace that is still brisk, and look set to start accelerating again soon. A move this week would take the cash rate to the bottom of a “neutral” range.
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