Michele Bullock has provided a cogent argument for raising interest rates, but she has been careful not to offend Treasurer Jim Chalmers by explaining why inflation has been so strong.
to influence monetary policy backfired spectacularly because it left Reserve Bank governor Michele Bullock little choice but to raise interest rates in a defiant display of independence.
As is its custom, the RBA board would have considered its various options. In this case, there would have been two possibilities: keeping interest rates steady, or a 25 basis point rate hike., the statement notes, but it is “still too high and is proving more persistent than expected a few months ago”.In the near-term, inflation will be higher than the RBA previously forecast , heightening the risk that inflationary expectations could become entrenched.
As the statement notes, “the board judged an increase in interest rates was warranted today to be more assured that inflation would return to target in a reasonable timeframe”.
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