The governor of Australia’s central bank, Philip Lowe criticised markets for forecasting a rate rise as early as next year, sending the Australian Dollar down.

Following a speech by the Reserve Bank of Australia governor to the Anika Foundation, where he said conditions for a rate rise were a long way away, the Australian Dollar was the worst performing major currency.

Lowe added inflation needed to remain within the 2-3% range before a rate hike could be considered, and in order to do this, wages needed to improve.

He added that the Delta variant of coronavirus had weakened Australia’s labour market by increasing unemployment and lessening hours worked, reports Pound Sterling Live.

"Total hours worked are expected to decline by 3–4% in the September quarter. There is uncertainty about the unemployment rate for the reasons I just spoke about, but it would not be surprising to see readings in the high fives for a short period of time," said Lowe.

As such, Lowe believes the central bank would only consider hiking rates in 2024: "This judgement stands in contrast to the expected path of the cash rate implied by market pricing. The current OIS curve implies a cash rate of around 25 basis points by end of 2022, 60 basis points at the end of 2023 and close to 100 basis points at the end of 2024.

"These expectations are difficult to reconcile with the picture I just outlined, and I find it difficult to understand why rate rises are being priced in next year or early 2023,” he added.

Lower interest rates and the likelihood of a ‘lower for longer' scenario, place downward pressures on the Dollar. Indeed, the Pound-to-Australian Dollar exchange rate increased 0.40% to trade at 1.8862, whilst the Australian Dollar-to-U.S. Dollar exchange rate fell 0.5% to 0.7332.