RBA to ‘Do What’s Necessary’ to Hit Inflation Target, Lowe Says

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The Reserve Bank of Australia “will do what’s necessary” to bring inflation back down to its 2-3% target, Governor Philip Lowe said, as he warned interest rates would need to push higher to achieve that goal, Bloomberg News reported. Inflation could accelerate to as much as 7% by year’s end and is unlikely to begin slowing until the first quarter of 2023, Lowe said in an interview with Australian Broadcasting Corp.’s 7:30 Report on Tuesday. “Australians need to be prepared for higher interest rates,” he said, adding that it would be “reasonable” to expect the cash rate to climb to 2.5% at some point. “How fast we get to 2.5%, indeed whether we get to 2.5%, is going to be determined by events.” The RBA wrongfooted markets and economists last week when it hiked by a bigger-than-expected 50 basis points to take the cash rate to 0.85%, and signaled further increases to come. Most economists are now predicting it will raise by another half-point at next month’s meeting. The central bank is among more than 50 monetary authorities that have raised by at least a half-point in one move this year. The Federal Reserve is increasingly expected to increase rates by 75 basis points at this week’s meeting as US inflation escalates further. The RBA’s outsized hike came as Australian power prices are soaring and labor costs are pushing higher, exacerbating existing inflation pressures. Read more.