The International Monetary Fund (IMF) said the Reserve Bank of Australia (RBA) should be prepared to raise interest rates further if underlying inflation pressures persist or financial conditions prove insufficiently restrictive. Inflation is expected to remain elevated through the end of the year before gradually converging toward the RBA’s 2% to 3% target range. The IMF warned that a renewed sharp increase in international energy prices could lift inflation expectations and require additional tightening. Australia’s economic growth is forecast to slow over the next two years, although resilient household spending and business investment could keep inflation high for longer. Markets imply an 87% chance that the RBA will raise its 4.35% policy rate by 0.25 percentage point at its meeting later this month, with expectations that the rate will reach 4.85% by early 2027. July consumer prices rose 1.0% from the previous month, exceeding the 0.8% market forecast, as fuel prices jumped 7.5%; core inflation also exceeded expectations.