IMF Warns of Further Interest Rate Hikes Amid Inflation Concerns

The International Monetary Fund (IMF) has advised the Reserve Bank of Australia to be prepared for further interest rate hikes to control inflation. The IMF's latest report on the Australian economy, released on Thursday, highlighted the need for a 'soft landing' to return inflation to target in the near term.

The report noted that the Australian economy is facing challenges due to weak productivity growth and external pressures such as rising oil prices. The IMF projected the growth rate of Australia's economy would slow to 1.9% in 2026 and 1.6% in 2027, following three RBA rate hikes so far.

The IMF recommended that the RBA should 'stand ready' to hike rates as needed, citing persistent underlying inflation pressures and large uncertainty around financial conditions. However, it also cautioned that if growth slows sharply, the RBA should consider cutting rates only if inflation looks like getting under control.