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Australia's central bank hikes inflation forecast, warns of further rate rises

Forecasts revised up as economy shows resilience

Brent crude oil price at US78bbl

The Reserve Bank of Australia (RBA) has raised its forecasts for core inflation and wages growth, and warned that further increases in interest rates are likely.

The RBA's revised forecasts were released in its Statement on Monetary Policy on Friday, February 10.

The RBA now expects core inflation to reach 4.25% over the year to June 2023, up from its previous forecast of 3.75%.

It also expects wages growth to reach 4.5% over the year to June 2023, up from its previous forecast of 4.25%.

The RBA's revised forecasts come as the Australian economy continues to show resilience.

The labour market is strong, with unemployment falling to 3.5% in December 2022.

Consumer spending is also holding up, despite rising interest rates.

However, the RBA is concerned that inflation is becoming more entrenched.

It is particularly concerned about the impact of rising food and energy prices.

The RBA's revised forecasts suggest that further interest rate increases are likely.

The RBA has already raised interest rates nine times since May 2022, taking the cash rate to 3.35%.

It is likely to raise interest rates again at its next meeting in March.

Reserve Bank Of Australia