(Bloomberg) — Australian wages will need to grow at “3 point something” to sustain inflation around the middle of the central bank’s 2-3% target, Governor Philip Lowe said, while adding that it will not be the sole determinant for price pressures and, in turn, policy.

“Rather, we are using wages growth as one of the guideposts in assessing progress towards our goal and whether inflation is sustainably in the target range,” Lowe said in the text of a speech Tuesday. “As we get closer to that goal, you could expect us to provide further guidance, including our projections for inflation.”

His comments come as markets challenge the Reserve Bank of Australia’s dovish stance that rates are likely to remain at a record low of 0.1% for about two more years. As counterparts across the globe, RBA’s chief struggles to decide if recent prices accelerations are temporary or more long-lasting. 

Data last month showed third-quarter core inflation jumped back inside the RBA’s target for the first time in six years. The Wages Data for the same period will be released Wednesday, which will help shape our views about the future of Australian policy.

“We still have a way to go,” Lowe said, emphasizing that inflation is only just above the bottom of the target band. The trajectory of consumer-price rise is important as well, as a slower drift upward could have different policy implications than an abrupt rise. 

The governor reiterated that it was “still plausible” the first increase in the cash rate will not be before 2024. Market expectations are quite different. In overnight interest swaps, at least three rates hikes next year would be expected. There is even a possibility for a fourth.

Lowe did present a scenario that the inflation shock would be more pervasive and the labor force tightens faster, arguing for an increase in the rate of interest before 2024. However, he again rejected the possibility of a hike next year. 

“The latest data and forecasts do not warrant an increase in the cash rate in 2022,” Lowe said. “The economy and inflation would have to turn out very differently from our central scenario for the board to consider an increase in interest rates next year.”

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