ECB and BoE hold rates as RBA faces mounting pressure to hike

Global monetary policy remains on high alert as the European Central Bank (ECB) and Bank of England (BoE) joined the US Federal Reserve in holding interest rates steady this week.

The BoE maintained its rate at 3.75% following an 8-1 vote, with Governor Andrew Bailey labeling the pause "reasonable" amid Middle East volatility.

However, the bank warned that the Iran conflict could push third-quarter inflation 1.4 percentage points above previous forecasts.

Simultaneously, the ECB kept its rate at 2.0% but adopted a hawkish stance.

President Christine Lagarde noted the bank is "moving away" from its baseline, suggesting future hikes may be necessary as energy price shocks threaten broader economic stability.

This global caution provides a stark backdrop for Australia, where the Reserve Bank (RBA) faces intensifying pressure to diverge from the international trend.

Recent ABS data revealed annual CPI surged to 4.6% in March, the highest level since late 2023, largely fueled by a 32.8% monthly spike in fuel prices.

With housing costs also rising 6.5%, major lenders including Westpac, CBA, NAB, and ANZ now predict the RBA will lift the cash rate to at least 4.35% when it meets this Tuesday.

Markets are currently pricing in a high probability of this hike to curb persistent inflationary risks.