By Rahul Trivedi
BENGALURU, May 1 (Reuters) - The Reserve Bank of Australia will raise its cash rate by 25 basis points for a third straight meeting on May 5, taking it to 4.35%, according to a Reuters poll of economists, with more than a third expecting it to reach 4.60% or higher this year compared with none in a March poll.
Inflation concerns have intensified after the closure of the Strait of Hormuz, a key route for roughly a fifth of global oil supply, kept crude prices mostly above $100 a barrel,
briefly trading above $126 on Thursday.
Inflation has been above the RBA's 2%-3% target range since mid-2025, and the central bank began raising rates in early February.
The annual rise in the consumer price index jumped to 4.1% last quarter from 3.6%, which partly reflected the impact of higher fuel prices. Core CPI edged up to 3.5% from 3.4%.
Against that backdrop, a strong majority of economists, 30 of 33 polled April 27-30, expected the RBA to raise the official cash rate by 25 basis points to 4.35% on May 5.
SHIFT FROM MARCH SURVEY
That was a shift from a March survey when a small majority of economists were expecting rates at only 4.10% by mid-year.
If realised, a third rate rise would fully reverse last year's cuts.
"Our basis for a prediction of a hike is inflation is basically too high in Australia," said AMP economist My Bui.
"Before, our base case was there would be a quick reversal in the closure of the Strait of Hormuz and it would only impact headline inflation. But right now, even if it opens tomorrow, we'll see the trimmed mean inflation numbers spiking up in the second quarter," he said.
The path beyond May remains uncertain. While a majority of economists, 18 of 31, still expected the cash rate to hold at 4.35% through year-end, more than a third now see rates climbing to at least 4.60% by the end of Q3, a view absent just a month ago.
ANZ, CBA and NAB expect rates to peak at 4.35% while Westpac forecasts 4.85%.
INFLATION EXPECTATIONS
"The outlook for the cash rate beyond May is necessarily less certain," said Luci Ellis, chief economist at Westpac.
"The RBA's experience last year, when underlying inflation popped back up almost immediately after it cut rates, will have nudged some within the RBA to the idea that the cash rate needs to be higher than its previous peak to really get inflation under control."
Inflation was expected to average 3.8% this year, up from 3.1% before the war, while the median economic growth forecast for this year was unchanged at 2.2%, according to a separate Reuters poll last month.
"The biggest problem right now is inflation expectations," AMP's Bui said. "If the RBA is not hawkish, then consumers might see a bit more of an entrenched higher inflation expectation number coming in and that is much harder to unwind."
(Other stories from Reuters global economic poll)
(Reporting by Rahul Trivedi; Polling by Pulkit Khanna and Veronica Khongwir; Editing by Vivek Mishra; Jonathan Cable and Alsion Williams)
