RBA Considers Further Interest Rate Hikes Amid Persistent Inflation Worries

RBA's Assistant Governor Sarah Hunter stated that the Reserve Bank of Australia (RBA) may need to raise interest rates further if inflation proves more persistent than expected.

Hunter made this remark at an Australian Financial Review event, where she emphasized that the central bank remains focused on bringing inflation back to target and will respond if price pressures fail to ease.

The RBA had left its cash rate unchanged at 4.35% in August after three increases earlier this year, citing that inflation was still too high and warning of upside risks requiring further tightening.

Australia's annual inflation rate was 3.5% in July, while second-quarter economic growth came in stronger than expected, adding to concerns about resilient demand.

Markets have increased bets on another RBA interest rate hike, with a 70% chance of a 25-basis-point increase to 4.60% at the September meeting now priced in, up from less than 10% just a month ago.