"The RBA appears to have a strong tightening bias. It has lifted its underlying inflation forecast for early 2008 to 3.25%, or above the top of the target band, and expects it to stay there till late 2008. In our view another RBA cash rate rise to 7.0% is reasonably likely in February 2008. Two factors are driving the view. The first is a shift to the upside for the inflation risks because of more widespread price pressures. The second is a continued upbeat view on the non-farm growth outlook for the year to June 2008. The RBA expects overall 2007/8 GDP growth to be near 3.75%pa, with farm sector weakness offset by the non-farm economy running above 4%pa.

The December quarter CPI is released on 23 January and we expect another rate rise on 6 February."

To read the full report (2 pages) please click on the link below:

RBA Statement on Monetary Policy (SMP), 12 November 2007.