Reserve Bank of Australia chief Philip Lowe said the coronavirus is having a 'significant'effect' on the country's economy

Reserve Bank of Australia (RBA) Governor Michele Bullock warned on Thursday that the central bank will raise the interest rate if needed to curb the persistent inflation.

Two days after the RBA kept the rate unchanged at 4.35% for the sixth consecutive time, Bullock said, "The board remains vigilant with respect to upside risks on inflation and will not hesitate to raise rates if it needs to. I know this is not what people want to hear," The Guardian reported.

Speaking in New South Wales, Bullock added that if the market turned volatile, RBA "wouldn't hesitate" to take steps such as slashing the cash rate.

However, analysis of financial markets presents only a 50% chance of an interest hike when the bank's board meets next in September, according to the ASX rate tracker, and an 80% chance in December.

On Tuesday, Bullock had ruled out "near-term" cuts despite high inflation and data on employment rate.

Australian bank Westpac forecast a rate cut next February, a shift from its earlier prediction of a November cut, Reuters reported.

"The RBA's conviction levels around these forecasts are evidently not high enough to consider moving in the short term," Luci Ellis, chief economist at Westpac, said.

Meanwhile, Prime Minister Anthony Albanese rejected criticism that his government's spending was adding to inflation. He said the Labor government's two budget surpluses and several measures, which were aimed at reducing the living expenses, have helped bring down the prices.

"Fee-free Tafe, cheaper childcare, energy price relief – all of these measures are aimed at making sure we look after people but do so in a way that's designed to see inflation continuing to moderate, which is what we want to make sure happens," Albanese said.

The core inflation, which ran at 3.9% in the last quarter, was expected to slow down towards the end of 2025.