The Fed plans to keep hiking, but Australia is around to wait as it warns of risks

March 9, 2023: As Federal Reserve Chair Jerome Powell hints at more significant and possibly faster price hikes ahead, Australia’s central bank could be towards a different path.

On Wednesday, Reserve Bank of Australia’s governor Philip Lowe said the central bank is near where it is ready to hit the brakes on rate hikes.

“With monetary policy now in the restrictive territory, we are closer to the point where it will be suitable to pause interest price increases to allow more time to assess the state of the economy,” he said.

While focusing on the central bank’s aim to bring down the rise of living costs, he said the central bank grapples with two issues when making monetary policy decisions.

“One is the risk of not doing enough, which would result in high inflation persisting and later proving very costly to leave,” he said.

“The other is the risk that we move too soon, or too far, and that the economy slows by over is necessary to bring inflation down in a timely way,” he said.

Lowe’s statements come following the central bank’s hiked its benchmark overnight cash rate by one more 25 basis points to 3.6%, marking the highest that it has been since June 2012.

Australia’s stocks rose slightly after the smaller hike and less hawkish commentary from the RBA, with the benchmark index S&P/ASX 200 closing 0.5% higher on Tuesday.