SYDNEY (Reuters) – Australia’s chief central banker reiterated on Thursday that it was premature to consider cutting interest rates in the near future because inflation remained too high, maintaining a hawkish stance even as data showed the economy was struggling to grow.

In a speech in Sydney, Reserve Bank of Australia (RBA) Governor Michele Bullock said the central bank’s top priority remained bringing inflation down to its target of 2-3%.

“If the economy continues to perform as expected, the board does not expect to be able to lower interest rates in the near future,” Bullock said.

The hawkish rhetoric came even as data this week showed the economy barely grew in the second quarter as household consumption fell. The monthly consumer price report also showed that core inflation fell to 3.5% in July.

Bullock stressed that domestic inflationary pressures, such as in the real estate and market services sectors, continue to contribute to above-target inflation, which is one reason why core inflation is not expected to slow to target levels until late 2025.

She acknowledged that the bank’s central forecasts are subject to significant uncertainty, adding that the board will respond appropriately to any change in circumstances.

However, Bullock warned that if high inflation becomes a persistent expectation, the RBA would need to slow the economy further to calm it down.

The RBA has kept interest rates unchanged at 4.35% since November last year. It believes this is tight enough to bring inflation down to its target level while preserving employment growth.

“Ultimately, however, it is important to remember that we will not achieve our goal of full employment if inflation remains persistently above target,” Bullock said.

Markets are still betting there is a 42 per cent chance the RBA will cut interest rates in November, partly on expectations the US Federal Reserve will ease policy this month, joining most other major central banks.

The RBA interest rate cut by December is already almost fully priced in.

Bullock noted that retail goods inflation is now approaching its historical average, while growth in administered prices is only slightly above its long-term average.

Rent inflation is likely to remain high for some time, while labour costs will continue to rise strongly, driven by wage growth and weak productivity growth, she added.

(Reporting by Stella Qiu; Editing by Shri Navaratnam)