By Stella Qiu

SYDNEY (Reuters) -Australia’s top central banker said on Wednesday he is confident higher interest rates are working to cool inflation but it is possible they will have to rise further, suggesting a decision on whether to resume hiking in August may be a close one.

Reserve Bank of Australia Governor Philip Lowe also announced changes to how the central bank formulates and announces interest rate decisions, including fewer but longer meetings, after a review recommended sweeping changes to the decades-old institution.

The RBA held rates steady last week, having raised interest rates by a whopping 400 basis points since May of last year to an 11-year high of 4.1%, saying it wanted time to assess the impact from past hikes.

“The Board is very conscious that monetary policy operates with a lag and that the full effects of the tightening to date have not yet been felt,” Lowe said in a speech to economists in Brisbane.

“We’re confident that what we’re doing is working. The question mark is how much more do we need to do? And we have got a completely open mind on that question.”

Lowe noted that the board would have an updated set of economic forecasts next month as well as a revised assessment of the balance of risks, which would help to inform the August decision.

Markets took the comments from Lowe as slightly dovish, with three-year bond futures rising 8 ticks to a session high of 95.97. Investors are divided on whether the RBA will raise rates in August, with futures showing about a 57% chance of no move.

“Whether or not this (further tightening) is required will depend on how the economy and inflation evolve,” Lowe said.

SEA CHANGES AT RBA

Lowe, who is set to find out this month whether his term will be extended for another seven years, laid out some of the changes the board has decided upon in response to the review.

From 2024, the RBA will meet eight times a year, compared with 11 times currently, while the meetings will last longer, Lowe said.

The governor will hold a news conference after each meeting, and quarterly statements on monetary policy, which include the bank’s economic forecasts, will be released at the same time as the policy decision.

The board will also decide on some other recommendations from the review, including the publication of an unattributed vote count, at a later date.

Treasurer Jim Chalmers said on Wednesday the cabinet would meet soon to decide the next RBA governor, and local media reported that the decision could come as soon as this week.

Lowe has been under a cloud since repeatedly saying in 2021 that interest rates would not rise until 2024, only to reverse course and hike in mid-2022 when inflation unexpectedly surged.

(Reporting by Stella Qiu; Editing by Muralikumar Anantharaman and Edmund Klamann)

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