RBA Expected to Raise Policy Rate by 25 Basis Points at May Meeting, ANZ Says

MT Newswires Live04-29 12:50

The Australian central bank is likely to remain cautious around the inflation outlook, with annual growth in underlying inflation at 3.5% as well as the expected impact of higher fuel and other costs, and it is forecast to increase interest rates by 25 basis points at its May meeting, ANZ said in a Wednesday report.

Australia's consumer price index increased 1.4% in the March quarter compared with the previous quarter, while the trimmed mean rose by 0.8%.

The first-quarter trimmed mean was softer than the Reserve Bank of Australia's (RBA) likely forecast of around 0.9% from February. Some of the momentum in underlying inflation evident in late 2025 appears to be moderating, per the report.

The three-month annualized rate of trimmed-mean inflation was just above the RBA's target band at 3.2%, suggesting that some of the lift in inflation in the second half of 2025 was related to temporary factors.

Automotive fuel prices lifted 33% month-over-month in March, the strongest monthly rise since the series began in 2017. ANZ expects headline inflation to peak around 5% year-over-year in the second quarter.

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