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RBA official says rate hikes are hitting their intended impact

Chris Kent said a higher exchange rate is helping curb inflation by lowering domestic import prices, and flagged the possibility of more hikes if risks emerge.

Reported · Written up by our desk · Central Banks

Reserve Bank of Australia Assistant Governor Chris Kent said cash rate hikes are producing the intended effect, adding that further rate increases may be warranted if risks to the outlook emerge, according to FXStreet.

Kent noted that an elevated Australian dollar can help curb inflation by reducing domestic import prices, and said the cash rate is near the top of central estimates of a neutral rate drawn from several models.

He also pointed to softer conditions in the housing market in recent months, attributing part of the cooling to tax changes in Australia’s federal budget that likely reduced demand for established housing.

Kent highlighted uncertainty around the path for inflation, citing disappointing productivity that could make the inflation challenge harder, and said the board will carefully weigh broad influences on financial conditions.

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