Experts weigh in: Will the RBA hike rates again?

The Reserve Bank of Australia (RBA) left interest rate unchanged at the May meeting, as was widely expected by economists.

But some have suggested another hike could be on the horizon given less than optimistic inflation data which rose 1% in the March quarter.

In addition, the RBA lifted its Consumer Price Index forecast by 5bps in June and December 2024 to 3.8% but still expects inflation will return to the top of the target range by December 2025.

In its statement, the central bank said it "remains vigilant of upside risks" and noted that while it previously indicated interest rates had peaked, it said the path to get inflation back into the target range was "uncertain".

Commonwealth Bank head of Australian economics Gareth Aird said despite the potentially rocky road ahead, the bank is still anticipating the next move will be down.

"The board did not reinstate its hiking bias and maintained the neutral stance it shifted to at the March board meeting, as we anticipated," Aird said.

"Our base case sees the RBA on hold until the November board meeting when we expect the RBA to commence an easing cycle."

RSM economist Devika Shivadekar said it is likely the RBA will continue its holding cycle until it gets more inflation data in the coming months.

"It would be logical for the RBA to await two additional quarterly CPI readings before adjusting its course," she said.

"The central bank maintains a neutral stance, a touch more hawkish than the last one but retaining maximum optionality while closely monitoring global and economic developments."

Shivadekar said the upward revision to inflation forecasts meant more room for the RBA to move higher if inflation does not come down.

"The challenge for the central bank will be managing consumer weakness against price pressures in the coming months," she said.

"Today's decision aligns with our expectations, with inflation forecasts adjusted upwards, likely considering upcoming tax cuts and budgetary changes.

"We do not see this as hawkish. As we have said before, the RBA seeks better balance of risks between its dual directive of price stability and full employment."