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© Reuters. FILE PHOTO: Governor of the Reserve Bank of Australia (RBA) Philip Lowe attends the G20 Finance Ministers and Central Bank Governors Meeting in Nusa Dua, Bali, Indonesia, 16 July 2022. Made Nagi/Pool via REUTERS   MS +2.53% Add to/Remove from Watchlist Add to Watchlist Add Position Position added successfully to:

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Some further tightening may still be required to bring inflation to heel but that would depend on how the economy and inflation evolve, said Reserve Bank of Australia (RBA)’s Lowe said at the Morgan Stanley (NYSE:MS) Australia Summit in Sydney.

The RBA has projected headline inflation – which is at about 7% now – to return to the top of the bank’s target of 2%-3% by mid-2025, a slower path than many other economies as Lowe wants to preserve strong gains in the labour market.

“It is too early to declare victory in the battle against inflation,” said Lowe, conceding that the narrow path the central bank was trying to achieve – without crashing the economy into a recession – was likely to be bumpy.

“I want to make it clear, though, that the desire to preserve the gains in the labour market does not mean that the Board will tolerate higher inflation persisting.”

Price pressures have led the RBA to raise its cash rate by 400 basis points since last May, the most aggressive tightening campaign in modern history.

Inflation has peaked and the April CPI reading of 6.8% – which came in higher than expected – has not changed the bank’s assessment that inflation is trending lower, according to Lowe.

He also elaborated on four areas that the Board would be paying close attention to in upcoming policy decisions – global economy, household spending, growth in unit labour costs and inflation expectations.

Services price inflation in the country remained high, with rents rising quickly and electricity prices set to increase further, unit labour costs are rising briskly without a pickup in productivity, and medium-term inflation expectations could start to shift higher, said Lowe.

“It is in Australia’s interest that we get on top of inflation and we do so before too long. The Board will do what is necessary to achieve that.”