Hauser Warns Higher Rates Loom if Inflation Risks Materialize

Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser warned on Wednesday that higher interest rates are likely if inflation risks materialize. Speaking at an event in Queensland, Hauser highlighted three upside risks to inflation: the Middle East conflict, the global AI boom, and poor productivity.

The RBA held interest rates steady at 4.35% last week after hiking by 75 basis points since February to curb stubborn inflationary pressures. However, Hauser emphasized that if these inflation risks crystallize and inflation does not come down, the central bank will raise interest rates again.

Markets imply a 60% chance of a further increase to 4.6% by December due to rising oil prices amid the Middle East stalemate. Hauser noted that while the economy has slowed, with consumption and employment growth experiencing a bit of a slowdown, it is not a slump or depression.