RBA economist says rates may need to rise again

SYDNEY, Sept 22 (Reuters) — The head economist at Australia's central bank on Tuesday reiterated that interest rates might have to rise for a fourth time this year to ensure inflation was reined in, underlining market wagers on a hike as early as next week. Appearing on a podcast, Reserve Bank of Australia Assistant Governor Sarah Hunter said the central bank's policy board was concerned that inflation had been too high for too long and risked getting baked in to price-setting behaviour. "We can see lots of reasons why inflation might be a bit higher than what we currently think," said Hunter, noting higher energy costs from the Middle East conflict and signs domestic demand was running ahead of supply. "And it might be the case that the board feel that they have to, you know, raise the cash rate again to slow the economy down just a bit more to really tackle those pressures," added Hunter, who heads the RBA's economics unit. The board has increased rates by 75 basis points since February, taking them back to a post-pandemic high of 4.35%. Yet core inflation is still running at 3.6%, well above the RBA's target range of 2% to 3%. Markets have priced in a 95% chance the RBA board will lift rates to 4.60% when it meets on September 29, and see rates peaking at 4.85% by early next year. "We think and hope that inflation's going to ease... but we've got to wait and see and a few things we've got to play out right if you like for that to happen," said Hunter. "We'll see how we go over the next few months." (Reporting by Wayne Cole in Sydney; Editing by Matthew Lewis) ((mailto:Wayne.Cole@thomsonreuters.com; 612 9171 7144; Reuters Messaging: rm://wayne.cole.thomsonreuters.com@reuters.net/)