The Reserve Bank of Australia won’t hesitate to push through even bigger interest rate hikes if they’re needed to to fight the “scourge of inflation”, its governor has foreshadowed.
While painting a rosy picture of Australia’s place in the world compared to the majority of other countries, RBA governor Philip Lowe said the cash rate would likely keep climbing, and put on the table the possibility of more rises double that seen yesterday.
“The board’s base case remains that interest rates will need to go higher still to bring inflation back to target and our forecasts have been prepared on that basis,” he told the RBA board dinner in Hobart last night.
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“We are not on a pre-set path, though. If we need to step up to larger increases again to secure the return of inflation to target, we will do that. Similarly, if the situation requires us to hold steady for a while, we will do that.”
The comments were broadly similar to Lowe’s statement yesterday afternoon after hiking interest rates by 25 basis points to 2.85 per cent, the highest since April 2013.
The RBA expects inflation to peak at 8 per cent by the end of the year – higher than the Federal Budget forecast of 7.75 per cent.
