While there has been talk of the Reserve Bank leaving the cash rate on hold for the remainder of the year, NAB is forecasting a tightening of monetary policy come August and a second rise before Christmas.
In the latest NAB Business Survey NAB chief economist Alan Oster said the Australian household and labour market will be significantly stronger by August, justifying a 0.25 per cent rate hike by the RBA.
“We have maintained our end point target cash rate at 5.25 per cent, to be reached in November 2011,” Mr Oster said.
“Any tendency for wage pressures to increase and become embedded in inflation expectations would see the RBA adopting a more aggressive monetary policy stance than we have assumed.”
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