SYDNEY, March 3 (Reuters) – Australia’s top central banker on Tuesday said an increase in interest rates was possible this month if the policy-making board decided inflation expectations were at risk of becoming unanchored, and markets should be aware of that.
Speaking at a business conference, Reserve Bank of Australia Governor Michele Bullock emphasised the board would not necessarily wait for the full first-quarter reading on inflation due in late April before deciding on whether to tighten.
“Every meeting is live,” Bullock said, referring to the next board meeting on March 17. “The board will be looking at whether it needs to be moving more quickly.”
Markets have tended to assume the central bank would wait for the first-quarter consumer price report due on April 29 before deciding whether to lift rates again at its May 5 board meeting.
Bullock said she wanted to “dissuade” markets from thinking like that.
The market was still only pricing in a 24% chance of a quarter-point rise in the 3.85% cash rate this month, following the RBA’s first hike in February.
Yet it is now fully priced for a rise to 4.10% in May and implies rates around 4.26% by the end of the year.
Asked about the implications of the conflict in the Middle East and the rise in oil prices, Bullock noted Australia was a net energy exporter which gave the economy a buffer.
However, she cautioned that if the rise in global energy prices was prolonged that could weigh on consumer demand and economic growth, while also putting upward pressure on inflation.
(Reporting by Wayne Cole and Stella Qiu; Editing by Chris Reese and Sonali Paul)
