Australian policy rates set to rise again in May

The Reserve Bank of Australia (RBA) raised its cash rate to 4.00% today, as expected. GDP growth is returning to trend and could even be there already, while core inflation is above target. Policy rates are still below neutral, so more hikes are only a matter of time. We expect another move in May once Q1 inflation data have been released, and still forecast that the cash rate will hit 5% by end-2010.

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