Former Bank of England boss makes chilling Australian interest rate prediction

One of the world’s most respected central bankers has made a grim prediction about Australia’s still-soaring interest rates.

One of the world’s most respected central bankers has made an alarming prediction about Australian interest rates.

Mark Carney, the former Bank of England governor, gave a speech via video-link to business leaders in Canberra on Tuesday.

Dr Carney said soaring inflation posed a “big challenge” globally and warned that interest rates will need to remain restrictive “well into next year”, the Australian Financial Review reported.

He added that while Australia was in a better position than some economies because of its robust banking system, Aussies may have to put up with a prolonged period of restrictive monetary policy.

Mark Carney, the former Bank of England governor, has issued a chilling warning about Australian interest rates. (Photo by DANIEL LEAL-OLIVAS / AFP)

“Once policy is adequately restrictive, stretching that well into next year is likely to be the strategy to bring down the final elements of inflation towards these inflation targets,” he told the Committee for Economic Development of Australia conference.

“The reality I think... is that we will need restrictive policy for a period of time.

“And that’s not something that our economies have faced for some time.”

Last week the Reserve Bank of Australia (RBA) imposed its 12th consecutive interest rate rise to 4.1 per cent from 3.85 per cent.

RBA governor Philip Lowe said the central bank may raise rates further to get inflation back to its target of between 2 and 3 per cent.

Soaring interest rates is hitting Aussie homeowners hard with all major banks passing on the rate rise.

If interest rates hit 4.85 per cent a household with a typical $750,000 loan can expect to pay $2049 more a month than they did in May last year.