The central bank was still "feeling its way" through the energy shock and what it meant for inflation, deputy governor Andrew Hauser said in a fireside chat in New York City on Tuesday morning, AEST.
The RBA raised interest rates in back-to-back meetings in February and March, after already-too-high inflation was compounded by the US-Israeli attacks on Iran and subsequent closure of the Strait of Hormuz.
With higher fuel costs leading to price increases across the board, many economists - including those at Australia's big four banks - predict a third consecutive cash rate rise to 4.35 per cent in May.
Mr Hauser said the RBA was unsure whether current rates were high enough to get inflation under control.
"Rates will have to go to a level that will bring inflation back to target, to be totally frank with you, and if that means them going higher, it means them going higher. If it means they're high enough, it means they're high enough," he told a New York University financial event.
"I wouldn't say we have high confidence that we've yet set interest rates at the right level, because you never do have high confidence. But we're going to have to monitor this new shock pretty carefully."
Mr Hauser said companies had told the central bank they were finding it incredibly difficult to pass on price rises.
Some models showed a visible shock like the Middle East crisis that impacted every company's cost base gave firms an opportunity to pass through price rises they might otherwise had found difficult, Mr Hauser said.
"If that's the case, well we'll have to react to that, but I don't know that we've seen enough yet to be sure."
The two RBA rate hikes and the Iran war caused the biggest plunge in consumer confidence since the onset of the COVID-19 pandemic, according to the Westpac-Melbourne Institute consumer sentiment index.
"Australian consumers are being hit by another 'cost of living' shock," Westpac's head of Australian macro-forecasting Matthew Hassan said.
The index declined 12.5 per cent to 80.1 points in April, near historic lows but still above the beginning of the pandemic and during the 1980s and early 1990s recessions.
"A sharp deterioration in expectations suggests consumers are bracing for a return to the extended period of weakness seen during the 2022–24 inflation fight," Mr Hassan said.
Meanwhile, business confidence notched the second-biggest fall on record in March, the National Australia Bank's monthly business survey found.
The 29-point decline in the index took it deep into pessimistic territory. Falls of that magnitude had previously only been seen during the Global Financial Crisis and the onset of COVID, NAB economists Gareth Spence and Michael Hayes said.
But business conditions only fell by one percentage point, "reflecting the fact that while the global news backdrop has impacted sentiment, it is still early in terms of the flow through to activity".
Forward-looking measures suggest the deterioration in conditions is on the way, though.
Forward orders fell six points, wiping away gains made since the start of 2026, while purchase cost growth rose three per cent in quarterly terms, double the rate recorded in February.
20°C