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MNI BRIEF: RBA's Lowe Says Rates Not At Peak Yet

(MNI) Perth

Reserve Bank of Australia Governor Philip Lowe signalled the prospect of a tenth hike in interest rates in testimony before the Senate economics committee on Wednesday.

"We've got an open mind. I don't think we're at the peak yet," Lowe said.

"How far we have to go up, I don't know. It's going to depend on the inflation data, the resilience of spending, the strength of the global economy and what's happening with prices and wages."

"I want people to understand that we're really serious about this," Lowe said, commenting on the RBA's resolve to bring inflation back to its 2-3% target.

The comments came a week after the RBA lifted rates 25bp to 3.35%, the highest level since 2012. (See MNI RBA WATCH: Hawkish Shift Puts 25bps On Table In March)

Lowe said he was not "overly worried" about a wage-price spiral as wage outcomes were consistent with inflation returning to target and businesses expect to offer small wage increases next year.

"I think it's relatively low [the risk of a wage-price spiral]. If we're wrong on that the costs are very high," Lowe said. "If we saw that develop then we're going to have higher interest rates and more unemployment. The Australian dollar was relatively unmoved by Lowe's testimony. (See AUD : A$ Drops On APAC Equity Weakness)

Robert covers RBA and RBNZ policy and the economy for MNI in Australia.
Robert covers RBA and RBNZ policy and the economy for MNI in Australia.

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