ASX-listed bank stocks rallied in afternoon trading on Tuesday after the Reserve Bank signalled it would further tighten monetary policy to counter the threat of rampant price inflation. The RBA raised the official cash rate by 25 basis points to 3.6 per cent at its March board meeting – the tenth consecutive official rise since May last year. The central bank remains concerned about the prospect of a vicious prices-wages spiral embedding inflation in the economy, even though recent evidence indicates a lower risk of it occurring. “At the aggregate level, wages growth is still consistent with the inflation target and recent data suggest a lower risk of a cycle in which prices and wages chase one another,” the board observed in its statement. “The Board, however, remains alert to the risk of a prices-wages spiral, given the limited spare capacity in the economy and the historically low rate of unemployment.  “Accordingly, it will continue to pay close attention to both the evolution of labour costs and the price-setting behaviour of firms.” The RBA made no reference in its statement to the inflationary impact of price gouging in oligopolistic industries such as domestic air travel and retail groceries where market leaders reported record profits and widening margins in the December half. This apparent blind-spot in the RBA’s commentary about inflationary risks is shaping as a serious bone of contention in community reactions to the tightening cycle. The Australian Council of Trade Unions was the first national interest group to react to the latest official rate rise yesterday afternoon. Its secretary Sally McManus accused the RBA of making the wrong call on the latest rise which she said would force more pain on ordinary Australians. The ACTU is disappointed with the RBA’s focus on wage growth in its deliberations on inflation while staying silent on the pricing power of dominant players in concentrated industries. “Everyone can see too many big businesses have increased prices more than they need to,” McManus said. “Every profit announcement reinforces what everyone suspects – price gouging. “Between the RBA and big companies, the average Australian is bearing all the pain of a situation they did not cause and have little control over.” While the prospect of further rate rises drew fire from the union movement, it was welcomed by investors in most bank stocks. The share prices of the four major banks rallied strongly after the RBA announcement on expectations that further official rate rises would support the recent rebound in net interest margins across the sector. Most bank stocks lost ground in the hours leading up to rate announcement at 2.30pm but surged after the central bank reinforced its hawkish bias on monetary policy. The country’s largest retail bank, CBA, traded as low as A$98.15 around midday but shot above $99 after the announcement. It was a similar tale for the three other majors, although investor support was strongest for ANZ and Westpac, which each closed up 1.2 per cent to $24.50 and $22.37 respectively. Economists are divided on whether the RBA will hike next at its April board meeting. CBA’s chief economist Gareth Aird