The Reserve Bank of Australia (RBA) held its cash rate at 4.75% today, as was universally expected. Low inflation and the uncertainty created by the floods disaster are likely to keep the RBA on the sidelines for a while. Nonetheless, above-trend GDP growth still looks probable in 2011-12, which will eventually lift price pressures. Accordingly, we continue to expect the RBA to hike its cash rate by another 100bp by mid-2012, with the next move up coming in August or September.
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