The Reserve Bank's new governor Michele Bullock worries that continuing global supply shocks may entrench inflation expectations and bigger price rises, forcing interest rates higher for longer.
The new Reserve Bank governor Michele Bullock says interest rate rises are slowing the economy but continuing global shocks, such as the latest Israeli-Palestinian conflict, risk keeping inflation and interest rates higher for longer.
"We think monetary policy is starting to bite," she said during a "fireside chat" at the Australian Financial Security Authority's inaugural annual summit in Sydney. "There's a few things that are suggestive that it's going to be difficult to get inflation down," she cautioned. Ms Bullock is worried that repeated price rises from supply shocks will eventually embed higher inflation over the longer term."And the more that that keeps inflation elevated, even if it's from supply shocks, the more people adjust their thinking. And the more people adjust their inflation expectations, the more entrenched inflation is likely to become."
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