RBA Warns Further Rate Hikes Loom if Conditions Don't Improve

Australia's Reserve Bank Assistant Governor Christopher Kent has warned of further policy tightening, citing inflation threats on the upside. Speaking at a Reuters event in Sydney, Kent said that 'a lot of things' would need to go right for rates to be on hold, including the Strait of Hormuz opening up and productivity growth picking up.

Kent's comments come after the RBA left interest rates steady at 4.35% for a second meeting, having already hiked by 75 basis points since February in an effort to restrain inflationary pressures. Governor Michele Bullock had warned earlier that she personally thought interest rates might have to go up again, even though the bank's latest forecasts had inflation coming back to the 2%-3% target band next year.

Markets imply around a 54% chance of a further increase to 4.60% by December, although investors assume that will likely mark the end of the tightening cycle. Kent also noted that the three rate hikes were working as intended to slow down demand, with housing credit growth starting to slow due to falls in property prices and new home lending.