Economists warn the Reserve Bank of Australia may implement two additional interest-rate rises this year as inflation continues to exceed targets [2].

These potential hikes would increase borrowing costs for households and businesses, further tightening the economy to curb rising prices. The move signals that the central bank may not be ready to pivot toward rate cuts despite broader market hopes.

Jo Masters, chief economist at Barrenjoey, said inflation is not yet on a sustainable downward path [1]. According to Masters, the economy requires a slower pace of activity before the Reserve Bank can consider lowering rates [1].

Data suggests a potential uptick in price pressures. Masters said the firm expects inflation to accelerate from 3.5 percent to 3.7 percent for the June quarter [1]. This projection remains well above the Reserve Bank of Australia's inflation target of 2.5 percent [1].

While some market analysts argue that the central bank is more likely to cut rates, other economists maintain that the current inflation trajectory necessitates further tightening [2]. The disparity in forecasts highlights the uncertainty regarding when the economy will return to the target range.

"We haven’t got inflation really on a sustainable downward path," Masters said [1].

Because the current figures suggest an acceleration, the central bank may view further rate increases as the only viable tool to stabilize the currency and cost of living. Masters said the primary requirement for a shift in policy is to see economic activity slow [1].

“"We haven’t got inflation really on a sustainable downward path."”

The prospect of additional rate hikes indicates that the Reserve Bank of Australia is prioritizing inflation control over immediate economic growth. If inflation accelerates to 3.7 percent, the central bank faces pressure to maintain a restrictive monetary policy to prevent price spirals, even if it increases the risk of a sharper economic slowdown.