SYDNEY, Aug 5 Reuters Australia39;s central bank on Friday warned inflation was heading to threedecade highs requiring further hikes in interest rates that would slow growth sharply, making it tough to keep the economy on an even keel.

In its quarterly Statement on Monetary Policy, the Reserve Bank of Australia RBA jacked up its forecasts for inflation, downgraded the outlook for growth and foreshadowed an eventual rise in unemployment.

Yet even with further increases in rates, inflation was not expected to return to the top of its 23 target range until the end of 2024, pointing to a long period of pain ahead.

It is seeking to do this in a way that keeps the economy on an even keel, said RBA Governor Philip Lowe in the introduction to the 66page statement.

The path to achieve this balance is a narrow one and subject to considerable uncertainty.

The central bank has already raised its cash rate four months in a row, taking it from an emergency low of 0.1 to a sevenyear high of 1.85 and is flagging more to come.

The Board expects to take further steps in the process of normalising monetary conditions over the months ahead, but it is not on a preset path, said Lowe.

Markets see rates reaching 3.0 by Christmas and peaking around 3.30 in April next year.

The hawkish outlook reflects the fact policy makers have been badly wrong footed by inflation which has surged on the back of rising costs for energy, food and construction.

The RBA has had to lift its forecast…