Key facts
- RBA Deputy Governor Andrew Hauser warned that interest rates could rise again if inflation risks materialize.
- Hauser identified the Middle East conflict, the global AI boom, and poor productivity as key upside risks to inflation.
- The RBA has held its cash rate at 4.35% for two consecutive meetings.
- Westpac and UBS now anticipate a 25 basis point rate hike from the RBA in March.
- The RBA previously increased rates by 75 basis points since February to combat inflation.
Reserve Bank of Australia Deputy Governor Andrew Hauser has indicated that the central bank may be compelled to raise interest rates again if current upside risks to inflation materialize. Speaking at an event in Queensland, Hauser identified the Middle East conflict, the global AI boom, and poor productivity as key factors that could push inflation higher.
The RBA has maintained its cash rate at 4.35% for the past two meetings, following a series of 75 basis points in hikes implemented since February to curb persistent inflationary pressures.
Following Hauser's remarks, financial institutions Westpac and UBS have revised their forecasts, now anticipating a 25 basis point rate increase by the RBA as early as March. UBS economists George Tharenou and Stephen Wu suggested that Hauser's comments imply a recommendation for a rate hike to the RBA Board in March, based on recent data and potential upward revisions to inflation forecasts. Westpac chief economist Luci Ellis noted that while higher oil prices may have a temporary impact on headline inflation, the monetary policy board might feel it necessary to react, especially if inflation expectations begin to de-anchor. However, ANZ economists Aaron Luk and Adelaide Timbrell continue to expect the next rate hike in May 2026, citing sticky inflation and lower-than-expected unemployment rates.