Lowe prompts double jump in rate forecasts

Investors have ratcheted up forecasts for Australian interest rates after an inflation warning from Reserve Bank governor Philip Lowe that triggered a bond market sell-off, pushing the yield on rate-sensitive bonds to decade highs.

In a rare, unscheduled interview with the ABC on Tuesday evening, Dr Lowe said it was “reasonable” to expect the cash rate to hit 2.5 per cent to fight inflation that could tip 7 per cent this year.