Australian Central Banker Warns Inflation Threats Remain Amid Rate Hike Uncertainty

Australia's Reserve Bank Assistant Governor Christopher Kent warned that interest rates may need to rise again as inflation threats remain on the upside. Speaking at a Reuters event in Sydney, Kent stated that 'a lot of things' would have to go right for rates to be held steady.

Kent noted that the current cash rate of 4.35% is considered somewhat restrictive, but uncertainties persist. He emphasized that the RBA's latest forecasts indicate inflation will return to the 2-3% target band next year, although Governor Michele Bullock personally thinks interest rates might need to go up again.

The RBA left interest rates unchanged at 4.35% for a second meeting, having already increased by 75 basis points since February to restrain inflationary pressures. Markets imply around a 54% chance of another rate hike to 4.60% by December, although investors assume this will likely mark the end of the tightening cycle.

Kent also stated that the three rate hikes were working as intended to slow down demand. He noted that falls in property prices and a decline in new home lending will start to discourage spending over time, which should reduce the need for further monetary policy action.