Reserve Bank of Australia flags 0.25% rate risk

• The Reserve Bank of Australia stated that interest rates could increase again if upside inflation risks crystallise.
• A potential 0.25% increase would take the benchmark cash rate to 4.6%.
• The central bank stated it is actively monitoring domestic capacity pressures and international conflicts to guide policy.

The Reserve Bank of Australia stated that interest rates could rise to 4.6% if inflation persists.

The statement contrasts with the two prior consecutive board meetings where officials maintained the existing cash rate.

The central bank left interest rates on hold for the second straight meeting at 4.35%, but Governor Michele Bullock has hinted it could still hike rates, with inflation expected to remain high until the middle of next year.

"While we concluded last week that interest rates were okay where they were for now, we’re worried about the inflationary outlook, and we’re worried about the upside risks to inflation," said Reserve Bank of Australia deputy governor Andrew Hauser.

The central bank stated that domestic consumption is forecast to grow by approximately 1.5% annually.

Officials stated that national employment levels are expected to expand by more than 1%.

The board noted that ongoing international conflicts and technology sector investments remain upside risks for domestic inflation.