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RBA may consider further rate hike to combat inflation
Economy
Reserve Bank of Australia Assistant Governor Sarah Hunter said on Tuesday that the central bank could raise interest rates again if inflation proves more resilient than expected.
This leaves open the possibility of another hike at the September meeting.
Hunter, speaking at an Australian Financial Review event, said the board remains focused on returning inflation to target and is prepared to take action if price pressures persist.
Markets have sharply increased bets on another policy tightening after recent data showed inflation remains elevated.
In August, the RBA left its benchmark rate unchanged at 4.35% after three hikes earlier this year, arguing that inflation remains too high and warning that upside risks could necessitate further policy tightening.
Australia's annual inflation rate was 3.5% in July, and stronger-than-expected economic growth in the second quarter has heightened concerns about demand sustainability.
Markets are now pricing the likelihood of a 25 basis point rate hike to 4.60% at the RBA meeting on September 29 at approximately 70%, compared to less than 10% a month ago.
The AUD/USD pair also benefited from the shift in rate expectations, trading near a four-month high of $0.722.