RBA Sounds Hawkish Tone as Inflation Risks Tilt to Upside

The Reserve Bank of Australia (RBA) has signaled that inflation risks are tilted to the upside, paving the way for potential interest rate hikes.

RBA Chief Economist Sarah Hunter stated that the central bank may need to raise interest rates for a fourth time this year due to domestic demand outstripping supply and the ongoing Middle East conflict driving up oil prices.

Markets have priced in a 95% probability of a rate hike to 4.60% at the September 29 meeting, with the peak rate expected to reach 4.85% early next year.

Hunter emphasized that interest rates are a tool for tackling inflation, not its root cause, and that the impact of rate hikes extends far beyond mortgage holders, affecting asset prices and the wealth effect.