(Bloomberg) -- Australia’s surprisingly strong inflationary impulse will likely see the central bank amend its forward guidance and open the door to earlier interest rate hikes, according to a senior economist at the nation’s second-largest pension fund. 

“The most important thing that will come out of next week’s meeting is the change in the language around the forward guidance for the cash rate target,” said Belinda Cheung at Aware Super, which manages more than A$150 billion ($106 billion). “That will give us a hint about interest rate liftoff.” 

The Reserve Bank of Australia holds its first policy meeting of the year on Feb. 1, when the board is likely to scrap a A$4 billion-a-week bond buying program. That expectation reflects recent strong economic data -- including unemployment falling to a 13-year low -- and a global move away from pandemic-era ultra-easy policy. 

A Bloomberg survey published Thursday showed the RBA is now forecast to begin its tightening cycle later this year, from a previous expectation of early 2023. Economists at two of Australia’s major lenders -- Commonwealth Bank of Australia and Westpac Banking Corp. -- predict liftoff in August.

Any rate increase would be the first since November 2010, at the height of the mining boom. The RBA began its easing cycle a year later in November 2011.

Cheung, who previously worked at the RBA, stopped short of making her own call on rate liftoff timing. She does, however, expect near-term inflationary expectations to pick-up after years of stagnation, in part driven by a sharp escalation in oil prices.

“Those oil price hikes are going to be broad-based,” she said. “It’s really hard sometimes or challenging for central banks to look through, as much as they’d like to, energy price hikes when they are persistent.”

When the RBA does embark on a tightening path, high household debt is unlikely to deter policy makers from hiking, Cheung said, pointing to high household savings. She also noted that banks’ balance sheets are “unquestionably strong” and able to weather any mortgage losses. 

“Even if the central bank starts to hike rates we’re still in really ultra accommodative monetary territory here,” Cheung said. “You are starting from a place where financial conditions are very, very easy.”

“So, there is a way to go before those rate increases have a material impact on output growth and consumption.”

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