The head of the Reserve Bank of Australia (RBA) reiterated on Wednesday that interest rates had not peaked, adding that he was unsure how high they had to go as the central bank, seeking to control inflation, tried to follow a narrow path to a soft landing.
Getting there, and avoiding a recession, depended on moderation in wage rises, RBA Governor Philip Lowe told members of parliament.
Despite a series of interest rate rises that began in May, consumer price inflation hit a 32-year high in the fourth quarter.
Inflation at the moment, 7.8%, is way too high. It needs to come down. That's our primary consideration," Lowe said.
When asked about how far interest rates would have to rise, he said policymakers had an open mind.
"I don't think we're at the peak yet but how far we have to go up I don't know," he said, adding that the central bank would keep monitoring inflation, consumer spending, the global economy and wages growth.
The central bank has lifted its policy rate by 325 basis points since May to a decade high of 3.35%.
"There is a risk that the tightening of policy that's taken place does dampen spending more than we think," Lowe said. "We don't have a perfectly clear crystal ball."
"But there is a risk on the other side. There is a risk that we have not yet done enough with interest rates and spending is more resilient and that inflation stays high."
"So the risks are two-sided and we're trying to navigate our way through a narrow path. I understand why some people focus on the risks on the one side but we've got to be attentive to the risk from higher inflation."
