IMF Warns RBA: Keep Interest Rates High Amid Inflation Risks

The International Monetary Fund (IMF) has urged the Reserve Bank of Australia (RBA) to remain prepared to lift interest rates if inflation pressures persist. The IMF released its preliminary assessment of the Australian economy on Thursday, stating that inflation remains the immediate policy challenge.

Inflation is weighing heavily on the economy's potential, with weak productivity growth also a concern. The IMF noted that the RBA should not ease monetary policy until there is convincing evidence that underlying inflation is on a sustained downward path.

The assessment adds weight to expectations that the central bank may need to keep monetary conditions restrictive for longer. Markets are pricing in a 76% chance of the cash rate reaching 4.6% at the RBA's September board meeting, a 15-year high.