Reserve Bank governor Philip Lowe says the bank board held interest rates steady last month to give themselves more time to analyse the state of the economy, and the latest data had convinced the board this month to lift the cash rate by 0.25 percentage points.

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 to 3 per cent target range, but the path to achieving a soft landing remains a narrow one,” he said.

The central bank expects the economy to continue growing, but slowly – it had forecast the economy will grow by 1.25 per cent this financial year and about 2 per cent to mid-2025.

Unemployment is expected to gradually rise to 4.5 per cent by the middle of 2025 as well.

“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,” he 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.”