RBA Official Warns Rates May Need to Rise Further Amid High Inflation Threat

A senior Reserve Bank of Australia official has sounded an alarm about potential further interest rate hikes. Assistant Governor Christopher Kent said on Thursday that inflation threats remain high and 'a lot of things' would need to go right for rates to be held steady.

Speaking at a Reuters event in Sydney, Kent stated that the current cash rate of 4.35% is seen as 'somewhat restrictive', but uncertainties remain. He emphasized that the risks are skewed higher when it comes to inflation, and that interest rates may need to rise further if certain conditions don't materialize.

Kent cited two key factors: a swift reopening of the Strait of Hormuz and a pickup in productivity growth. If these conditions fail to materialize, he warned, interest rates might increase again.

The Reserve Bank had already hiked rates by 75 basis points since February to combat stubborn inflationary pressures. Markets imply around a 54% chance of another rate hike to 4.60% by December, although investors assume this would likely mark the end of the tightening cycle.