Australia’s central bank is in a period where it needs to be “a little bit careful” in balancing efforts to bring down consumer prices without driving the jobless rate up too high, Governor Michele Bullock said.

“We want to ensure we keep inflation under control and we bring it back down to our band,” the Reserve Bank chief said in a panel discussion on Tuesday in Hong Kong, referring to the 2-3% target. “We also need to do that in the context of not imposing on the economy too much and raising the unemployment rate” too high.

The RBA earlier this month resumed raising interest rates after a four-meeting hiatus, noting that inflation remains high and the labor market and economy are more resilient than expected. Policymakers meet on Dec. 5 for the final decision of the year.

Bullock highlighted Tuesday that demand in Australia has been stronger than anticipated and added that services prices remain sticky.

Traders firmed up bets for the RBA to hike rates in the first half of 2024. Meeting-dated overnight indexed swaps show a better than 80% chance the central bank will raise its cash rate target to 4.6% by May, up from about 70% odds seen earlier on Tuesday.

“We’re in a period now where we have to be a little bit careful,” Bullock said at an event co-hosted by the Hong Kong Monetary Authority and the Bank for International Settlements.

The central bank is forecasting unemployment to peak at about 4.25% late next year, from about 3.7% now. It expects inflation to return to the top of its target in late 2025.

“What we’re starting to observe is second-round effects of some of these costs,” she said, referring to areas like wages, adding that businesses are finding demand is sufficient to be able to pass those costs through.

The RBA has raised rates by 4.25 percentage points in the current campaign, with the cash rate now standing at a 12-year high of 4.35%. It has indicated that further hikes will depend on inflation and employment data and how the global economy evolves.

Many economists, including at Commonwealth Bank of Australia, predict that the RBA is probably done hiking, though National Australia Bank and Royal Bank of Canada are among a handful that see at least one more move to 4.6%.

--With assistance from Garfield Reynolds.