SYDNEY, May 9: Australia’s central bank on Friday lifted its inflation prediction for 2008 but slashed estimated economic growth, a move economists said would likely see interest rates on hold until year’s end.

The Reserve Bank of Australia said in its quarterly statement on monetary policy that headline inflation was likely to peak at 4.5 per cent in 2008, a full percentage point above its previous estimate issued last February.

The inflation forecast is well above the bank’s 2-3 per cent target range and would normally be expected to spark speculation the central bank was poised to resume interest rate hikes in a bid to rein in price increases.

But the Reserve Bank also dropped its estimate for Australian economic growth in 2008 to 2.25 per cent, a percentage point lower than its February forecast.

The bank also said that while inflation would remain high in the short term, it was set to fall within the 2-3 per cent range by mid-2010.—AFP