SYDNEY: The head of Australia’s central bank on Wednesday rebuffed market talk of rate hikes, saying it will take at least until 2024 to reach full employment even as the economy was now within “striking distance” of its pre-pandemic output.

Australia’s A$2 trillion ($1.5 trillion) economy expanded by a larger-than-expected 3.1% in the December quarter, clocking its fastest ever back-to-back quarterly rises. Job growth has been sturdy while retail sales are going strong too.

“These better-than-expected outcomes are very welcome news,” the Reserve Bank of Australia’s (RBA) governor, Philip Lowe, said in a speech in Sydney.

“However, they do not negate the fact that there is still a long way to go and that the Australian economy is operating well short of full capacity.”

The remarks come as financial markets begin pricing in rate hikes by major central banks next year and in 2023 on the back of strong economic data and optimism about successful coronavirus vaccine rollouts, sending bond yields surging.

Lowe reiterated the RBA was committed to maintaining “stimulatory monetary conditions” for as long as necessary.

Core inflation, at 1.25%, was expected to stay below the RBA’s 2-3% target range for at least the next two years, he said, adding the board would leave the cash rate at 0.1% until actual inflation was sustainably within its target range. “It is not enough for inflation to be forecast to be in this range. Before we adjust the cash rate, we want to see actual inflation outcomes in the target range and be confident that they will stay there.”