Australia's central bank likely to hike interest rates further - HSBC

Australia's central bank may raise interest rates again early next year after it expressed concerns about inflationary pressures in a quarterly statement on monetary policy Monday, said HSBC Australia chief economist John Edwards.

"We continue to think one more tightening is highly likely, probably in February or March. Thereafter, it will depend on the pace of demand," Edwards said.

The Reserve Bank of Australia hiked its target cash rate 25 basis points to 6.75 percent last Wednesday following third-quarter consumer price data showing year-on-year underlying inflation at 3.0 percent, which was the top end of its target range.

In its statement, the RBA said underlying inflation is likely to rise to 3.25 percent in the final quarter but should ease to 3.0 percent by the end of 2008.

"As the RBA remarks today, somewhat lower outcomes could eventuate if the global economy slows more than expected," Edwards said.

But the central bank also noted it is possible at this stage of a long economic expansion that inflation will be more difficult to contain, particularly if domestic demand does not moderate.

"The market has taken it to be only mildly hawkish, but the Reserve Bank of Australia's quarterly statement on monetary policy has a nasty sting in the tail," Edwards said.