SYDNEY The head of Australia's central bank on Friday said policy was in the "calibration stage" as the worst was over for inflation, though some further policy tightening might be needed depending on incoming data and evolving risks.
Appearing before lawmakers, outgoing Reserve Bank of Australia (RBA) Governor Philip Lowe said the recent data are consistent with the economy continuing to travel along the "narrow path" to a soft landing in which inflation eases without unemployment rising dramatically.
Inflation, which peaked late last year at over a three decade high of 7.8%, trended down to 6% last quarter and is projected to return to the RBA's target band of 2-3% in late 2025.
After a substantial increase of 400 basis points in interest rates since May last year, Lowe said policymakers were in the "calibration stage", as rates are already restrictive and working to establish a balance between supply and demand.
"Looking forward, it is possible that some further tightening of monetary policy will be required to ensure that inflation returns to target within a reasonable time frame," Lowe said, reiterating earlier comments.
"Whether or not this is the case will depend upon the data and the Board's evolving assessment of the outlook and risks."
This is Lowe's last such appearance given the government chose not to reappoint him when his first term ends in mid-September, instead elevating Deputy Governor Michele Bullock.
Lowe acknowledged it has been a difficult year for Australians.
"But the worst is over and we're getting to a place now to return to inflation back to target and a stronger labour market than we had before the pandemic," said Lowe.
The RBA's aggressive rate hikes have pushed up the cash rate to a decade-high of 4.1%, though it did pause in July and August to assess whether inflation was heading lower as desired.
Financial markets and analysts are split on whether there might be one more rate rise later this year..
Lowe added that rates would have to be 100 basis points above current levels to get inflation down to target in 2024.
(Reporting by Stella Qiu and Wayne Cole; Editing by Christian Schmollinger and Stephen Coates)