SYDNEY, Feb 12 (Reuters) – Australia’s central bank will raise rates again if inflation becomes entrenched, its governor said on Thursday, having just delivered the first rate rise in two years last week.
Reserve Bank of Australia Governor Michele Bullock said it was, however, not clear at the moment that bringing inflation down would require more rate rises, and policymakers would be watching data closely.
“If we need to go up further because inflation is entrenched, the board will do so because that is its primary mandates,” Bullock said when questioned by lawmakers.
The RBA raised its cash rate last week by a quarter point to 3.85%, reversing one of three cuts made last year. Underlying inflation picked up to 3.4% last quarter, the fastest pace in over a year, and was expected to hit 3.7% this year, based on the RBA’s own forecasts.
The forecasts are centred on the technical assumption of additional tightening of a little over one more hike this year. Bullock said it was not clear if more rate rises were needed given the uncertainties with forecasting.
Markets imply around a 75% chance rates will rise to 4.10% at the RBA’s May meeting, following the release of first-quarter inflation figures.
(Reporting by Stella Qiu; Editing by Stephen Coates)
