Reserve Bank of Australia governor warns of more rate hikes

• Reserve Bank of Australia governor Michele Bullock stated that weak productivity is keeping inflation high and may force more rate hikes.
• Headline inflation currently sits at 4%, which remains well above the central bank's target range of 2% to 3%.
• The central bank stated that monetary policy will remain focused on maintaining low inflation and supporting sustainable full employment.

Reserve Bank of Australia governor Michele Bullock stated that the monetary policy board may need to raise interest rates again to combat headline inflation sitting above the 2% to 3% target range at 4%.

The central bank governor noted that the three rate hikes implemented earlier in the year may prove insufficient because slow economic productivity growth continues to constrain the nation without generating inflation.

"One thing monetary policy can’t do, however, is address the economy’s slow productivity growth," said Reserve Bank of Australia Governor Michele Bullock.

Bullock stated that another rate increase could push the cash rate to a 15-year high of 4.6% while underlying inflation remains elevated at 3.6%.

The central bank stated that the monetary policy board is prepared to act as required to achieve its mandate, including increasing the cash rate further if needed.

The central bank previously lifted the cash rate during three separate meetings held in February, March, and May.

Recent bank data indicates that house price falls in Sydney and Melbourne have left negative equity affecting less than one per cent of borrowers following the latest policy adjustments.