Interest rates expected to be kept on hold, but inflation threat persists

Experts are tipping interest rates will be left on hold today when the Reserve Bank of Australia (RBA) wraps up its May meeting today.

The board will announce its official cash rate decision at 2.30pm (AEST) and release its revised set of economic forecasts.

In the lead-up to the two-day meeting, economists were in broad agreement the RBA would keep interest rates at 4.35 per cent, the level they have been at since last November.

But stubborn inflation data has prompted warnings mortgage borrowers could be in for more pain in coming months.

In the 12 months to March, the consumer price index increased 3.6 per cent above the RBA's indicative forecast of 3.5 per cent.

That figure was also above the central bank's target of 2.5 per cent, which it is aiming for by 2026.

Among those warning of the inflation threat to Australia's economy was former RBA governor Philip Lowe.

"I understand that most people hope the peak has been reached and it may well have, but it might not have," he said.

"People have been asking me [about rates] through the course of the year and I've been reminding them there is still two-way risk."

This week's RBA board meeting is also the final one before the federal budget next week.