Ex-RBA Governor Macfarlane: Interest rates could rise sharply in order to fight inflation

Former Reserve Bank of Australia (RBA) Governor Ian Macfarlane warned over persistently high inflation and the need to sharply hike rates, in a speech on Wednesday.

Key quotes

Will be surprised if the CPU fell back to 2%.

There is enough scarcity in Australia and in the US to keep the rate of inflation high.

Expect interest rates to rise sharply in order to fight inflation, the 50bp hike yesterday was the correct decision.

Market reaction

AUD/USD is holding steady around 0.7225 amid a cautious market tone and a broadly firmer US dollar.