RBA Warns of Higher Rate Risks Amid Inflation Concerns

Australia's Reserve Bank Assistant Governor Christopher Kent warned of further policy tightening due to inflation threats on the upside. Speaking at a Reuters NEXT Newsmaker event in Sydney, Kent stated that the current cash rate of 4.35% is 'somewhat' restrictive but uncertainties remain.

Kent emphasized that 'a lot of things' would need to go right for rates to be on hold, specifically mentioning the Strait of Hormuz opening up and productivity growth picking up as crucial conditions. If these conditions fail to materialize, interest rates may need to rise further.

The Reserve Bank of Australia 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. Markets imply around a 54% chance of a further increase to 4.60% by December.