RBA Statement on Monetary Policy says further rate increases are needed

Earlier in the week we had the first RBA cash rate hike for over 11 years:

• RBA raises cash rate by 25 bps to 0.35%
• A cheeky move by the RBA helps to lift the aussie
• RBA's Lowe: Expects that further rate hikes will be necessary in the months ahead
• RBA's Lowe: A more normal level of rates would be 2.50%

Since then we have had some updated analyst forecasts:

• Goldman Sachs is forecasting the RBA cash rate at 2.6% by the end of 2022
• Westpac forecast a 40bp cash rate hike from the RBA on June 7

Headlines from today's SoMP via Reuters:

• further increases in interest rates needed to restrain inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term
• sharply raises inflation forecasts, sees core inflation above 2-3% band until 2024
• says appropriate to start normalising interest rates
• says inflation pressures broadening due to supply chain bottlenecks, strong demand
• says more firms expect materially higher wage costs, difficulty in finding workers
• says the economy has been more resilient than expected, nearer to full employment
• forecasts trimmed mean inflation at 4.6% Dec 2022, 3.1% Dec 2023, 2.9% June 2024
• forecasts CPI inflation at 5.9% Dec 2022, 3.1% Dec 2023, 2.9% June 2024
• forecasts unemployment 3.7% Dec 2022, 3.6% Dec 2023, 3.6% June 2024
• forecasts wage growth 3.0% Dec 2022, 3.5% Dec 2023, 3.7% June 2024
• forecasts gdp growth 4.2% Dec 2022, 2.0% Dec 2023, 2.0% June 2024
• forecasts assume cash rate of 1.75% Dec 2022, 2.5% Dec 2023
• says outlook for business/govt investment positive but constrained by capacity, supply chains
• says Australia terms of trade to reach new peak in mid-2022, stay high for longer
• says Australian dollar around where it was at start of year despite

Check out the core inflation forecasts - to stay above the top of the target band ( 2 to 3%) for a good time to come (out to December 2023 ... which didn't quite make it into the box I drew .... sorry 'bout that!)

But ... the range of forecasts show it could be MUCH higher (and therefore more rate hikes if so):

Full text:

• Statement on Monetary Policy– May 2022