RBA Deputy Governor Hauser: If Inflation Doesn't Fall, We Will Have to Raise Rates Again

Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser delivered a clear hawkish signal during Wednesday's Asian trading session, stating that inflation remains too high and the central bank needs to raise interest rates to ease price pressures. This stance reinforces the RBA's firm position on the inflation outlook, suggesting that despite the recent pause in rate hikes, the tightening cycle is far from over.

**Sticky Core Inflation Is the Primary Concern**

Hauser's warning aligns with the RBA's recent policy tone. According to the August 11 rate decision, the board unanimously agreed to hold the official cash rate at 4.35%. Although headline inflation eased slightly in June and house price declines exceeded expectations, core inflation remains elevated, which is the metric policymakers are most focused on. In its statement at the time, the RBA explicitly said the board will do whatever is necessary to return inflation to target, including raising rates further if upside risks materialize.

**Economic Forecasts and Risk Balance**

The RBA's latest economic forecasts are more optimistic than before, showing headline inflation nearly one percentage point lower than previously projected, with trimmed mean inflation also 0.2 percentage points lower. The central bank expects inflation to decline at a slower but steady pace, returning to the midpoint of the 2% to 3% target range by early 2028. However, Hauser's remarks this time focused on risk scenarios, emphasizing that if inflation falls slower than expected, the rate hike option will be back on the table. Governor Bullock has also previously revealed that the board only discussed hiking or holding rates, never cutting, and members are generally concerned that factors such as Middle East conflicts could bring new upside price risks.

**Markets Should Beware of Policy Shifts**

Hauser's comments indicate that the RBA's vigilance over inflation has not relaxed due to short-term data improvements. Market sources suggest the central bank believes overall domestic demand still needs to cool further to effectively bring down inflation. Investors should watch upcoming economic data closely, as any signs of core inflation stickiness exceeding expectations could trigger action at the RBA's next policy meeting in late September.