“We’ll do what’s necessary to get inflation back to 2-3 per cent,” he said on ABC’s7.30.
“I think by the end of the year inflation will get too close to 7 per cent,and we need to chart a course to bring it back down.”
The last time inflation rose more than 7 per cent was in the mid-1990s,as the country was entering a recession and the RBA was cutting the cash rate from 17 per cent in response.
This year,inflation has risen amid global supply chain pressures due in part to the war in Ukraine and COVID-19 lockdowns in China,while the unemployment rate has fallen to near 50-year lows and wages have begun to lift.
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Lowe said the current strength of the Australian economy meant it no longer needed emergency interest rate settings. As a result,the RBA board has raised interest rates twice in the past two meetings,taking the official cash rate from its pandemic low of 0.1 per cent to 0.85 per cent. It hasflagged more rate rises will come as it works to bring inflation back down.
The RBA governor said he expected a more normal cash rate to sit about 2.5 per cent,but said he could not predict how swiftly the bank would move to get it there. He said it would be determined by the data the board had at its disposal every month.