Australia's central bank is not concerned about inflation expectations becoming “de-anchored” in the short term, a senior official said on Wednesday, though policymakers remain vigilant to the possibility.

Speaking in Sydney, Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter stated that inflation expectations have remained stable, with recent research indicating that households have largely overlooked the recent surge in inflation, more so than the central bank had anticipated.

The central bank also highlighted that the connection between current wage expectations and inflation expectations is relatively weak, Reuters news agency reports.

“So we’re not currently concerned that expectations could become de-anchored in the near term,” Hunter said during a Citi investment conference.

“But we do think it's important that we track how they’re evolving and that we understand how expectations are formed, so we can monitor whether there are any signs of this risk materialising in the future,” she went on to add.

The Reserve Bank of Australia has maintained steady interest rates since November, concluding that the current cash rate of 4.35%, a rise from a pandemic-era low of 0.1%, is sufficiently restrictive to bring inflation down to its 2%-3% target range while sustaining employment gains. 

However, core inflation remains stubborn at 3.9%, which is why policymakers do not anticipate inflation reaching the midpoint of the target range until 2026. Market swaps indicate only a 40% chance of the RBA cutting rates in December, the Reuters report goes on to say.