by Stella Qiu
SYDNEY, June 7 (Reuters) – The chairman of Australia’s central bank reiterated on Wednesday his warning of further interest rate hikes to ease pressure from rising prices despite the risk of a sharp economic recession. In the last quarter of a year and a half.
After interrupting a nearly year-long tightening cycle in April, the Reserve Bank of Australia (RBA) surprised markets by raising rates in May and again this week. Its governor, Philip Lowe, said the assessment of inflationary risks had changed in recent months, including persistently high inflation in wages, house prices and services.
“We are willing to be patient … but there is a limit to our patience and (inflationary) risks are starting to test that limit,” Lowe said in a speech at the Morgan Stanley Australia summit in Sydney a day later. ” Raised the benchmark interest rate by a quarter point to an 11-year high of 4.1%.
“We can’t sit quietly and say it’s all accidental.”
The Australian dollar hit a three-month high of $0.6690 and the three-year government bond yield rose 5 basis points to a five-month high of 3.702%, adding to the 12 basis points gained on Tuesday.
Lowe reiterated that more stringency may be needed to control inflation, with some analysts expecting rates to peak at 4.6%, while Goldman Sachs opts for 4.85%, which is higher than those offered by several banks. exceeds 4.35%.
The Reserve Bank of Australia expects headline inflation, currently hovering around 7%, to return to the high end of its 2-3% target by mid-2025, more of a recession than many other economies. The middle way, as Lowe seeks to maintain strong gains in the labor market.
However, the RBA chief said that “the desire to maintain labor market reforms does not mean the council will tolerate higher inflation”, raising the risk of a hard landing for the economy.
(Reporting by Stella Qiu; Editing by Himani Sarkar and Shree Navaratnam; Editing in Spanish by Tomas Cobos)
