A cut in interest rates could not be ruled out, a senior central banker said on Monday, but emphasised that the next move was still likely to be an increase given expectations for a gradual acceleration in inflation.

The Reserve Bank of Australia (RBA) has remained patient on policy since last reducing the cash rate to a record low 1.50 per cent in August 2016. It has repeatedly cautioned that further cuts will only fuel a debt binge in the country's housing market.

Kent sounded upbeat about the overall domestic outlook but noted an "unnecessary" credit tightening by the country's major banks was a threat to activity. Credit:Rob Homer

"We have said that it's likely the next move is up, it doesn't mean if it's needed the next move might not be down," RBA assistant governor Christopher Kent said at a Bloomberg event in Sydney.

"But that's not in our forecasts, which are for a gradual fall in unemployment and a gradual rise in inflation. And that's why the next move will likely be up."