The RBA’s inflation forecast seems optimistic.

We have strong upward pressures on wages, rents, electricity, and inflation expectations.

Admittedly, recent inflation was boosted by temporary supply constraints that are unwinding. But experience in countries where these constraints emerged earlier does not suggest they will bring a quick disinflation.

Coupled with an unemployment rate that is very low and falling, policy needs to tighten faster than the RBA’s assumptions.

To pause for reasons of financial stability would be counter-productive. It would imply that the RBA is worried about something the public has not been told about.