Australian central bank governor Glenn Stevens on Friday said inflation is unlikely to fall much further, with the strength of the Australian dollar having some dampening affect on prices.
Facing the House of Representatives economic committee on Friday in Canberra, Stevens said inflation was expected to be pretty close to where it currently stands over the coming year, signaling policy rates are "appropriate" in the near term.
The consumer price index was 2.8 percent in the year to end- September.
"But looking further ahead, in an economy with reasonably modest amounts of spare capacity, the terms of trade near an all- time high and the likely need to accommodate the largest resource- sector investment expansion in a century, it is pretty clear that the medium-term risks on inflation lie in the direction of it being too high, rather than too low," Stevens told the committee in Canberra on Friday.
The Reserve Bank of Australia (RBA) has an inflation target of two to three percent.
On world economy, Stevens said the pace of global growth in 2010 was expected to be about 4.75 percent.
The RBA has increased the official interest rate seven times since October 2009 to 4.75 percent.
He said there are still many uncertainties in the global economy the central bank has to consider when adjusting interest rates.
However, he said he did not expect the U.S. economy to fall into a double-dip recession at this time. Uncertainties in Europe continued to "ebb and flow", but were increasing at the moment because of concerns over Ireland and other nations.
He said the pattern of growth still was "rather uneven".
"The additional strength has been concentrated in the emerging countries, with growth in China and India running at a pace of around 10 percent in 2010," he said.
