While inflation has declined from its December peak of 7.8 per cent, Lowe said inflation for services was still very high and potentially still rising. The jobs market also remains tight, with figures from last week showing the unemployment rate remained at the near 50-year low of 3.5 per cent, and many businesses were still struggling to hire workers.

Wages growth has also picked up, and Lowe said while it was in line with the bank’s inflation target range, the board remains alert to the risk of continued high inflation contributing to larger increases in wages and prices.

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“The board is still seeking to keep the economy on an even keel as inflation returns to the 2–3 per cent target range, but the path to achieving a soft landing remains a narrow one,” he said.

Lowe also signalled the RBA expects the economy to slow more than expected. He said GDP is now forecast to expand by 1.25 per cent this year. In its February forecasts, the bank expected economic growth of 1.6 per cent through 2023.

Unemployment is expected to be around 4.5 per cent by the middle of 2025. It is currently 3.5 per cent. The Reserve Bank will on Friday release its latest quarterly economic forecasts.

“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve,” Lowe said.

“The board will continue to pay close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market. The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”

More to come

Cut through the noise of federal politics with news, views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletter here.