+34
Reserve Bank of Australia Governor Michele Bullock says the bank may need to take stronger action to return inflation to its target, but acknowledges that higher interest rates and persistent increases in fuel, fertiliser and transport costs pose risks to the economy. The RBA is balancing inflation control with efforts to preserve recent employment gains as unemployment rises to 4.6 percent.
The governor of the Reserve Bank of Australia, Michele Bullock, speaking to media after the board raised the official interest rate to the highest level in 15 years.
The governor of the Reserve Bank of Australia, Michele Bullock, speaking to media after the board raised the official interest rate to the highest level in 15 years. The Reserve Bank appears ready to push harder against inflation but it comes with a greater risk for the economyFor years, the Reserve Bank has been attempting, as gently as possible, to steer inflation back to its 2.5% target while trying to retain as many of the post-pandemic job gains as possible.
“That still remains the strategy,” Michele Bullock, the RBA’s governor, told journalists on Tuesday afternoon, an hour after the board Unemployment has climbed by 1 percentage point over the past four years, sure, but at 4.6% it’s “still quite low historically,” Bullock said. Other central banks have managed to get inflation lower, sure, but at the cost of higher unemployment, she said. Bullock explained the RBA has been outside the 2-3% target range for six years now.
That’s a problem, because households and businesses need to believe that inflation will fall again, one day.
“We came in briefly in 2025, and then we’ve popped back out again. We are aiming to get it back,” she said. But how to get inflation back under control “in a reasonable time”, when unreasonable things keep happening? It’s the unending Middle East conflict that now looms as the biggest threat to the RBA’s careful approach to taming inflation.
As Bullock said: “When the Middle East conflict first started, everyone was sort of thinking, ‘Oh, it will probably not last very long’. ”Fuel prices, fertiliser prices, transport prices are now all “permanently higher”. The RBA governor is worried that businesses are also coming to the same conclusion, and will start lifting their prices. That will make it even harder to get inflation back to target without a more dramatic increase in interest rates.
Bullock and her board have long made it clear they will “do what it takes” to get inflation back to target, a phrase they repeated on Tuesday. After Tuesday’s announcement, a number of economists are betting the RBA will hike again in six weeks’ time, at the Melbourne Cup day meeting. Financial markets see a 50% chance of yet another increase next year.
That might be the right call, but it increases the risk the central bank will push too hard and, in Bullock’s words, drive the economy into a “dramatic slowdown”.
“Hopefully, in the next couple of years, when we get inflation back down, this will have all been worth it. ”
Reserve Bank Of Australia Inflation Interest Rates Unemployment Economic Outlook
Australia Latest News, Australia Headlines
Similar News: You can also read news stories similar to this one that we have collected from other news sources.
Michele Bullock's 22 press conferences reshape RBA rate communicationReserve Bank governor Michele Bullock has held 22 press conferences and spoken 150,000 words since February 2024, answering almost 600 questions while repeatedly warning about inflation and uncertainty.
Read more »
Chalmers Blames Middle East War for Inflation Ahead of Expected RBA Rate HikeTreasurer Jim Chalmers has blamed the Middle East war for pushing up petrol prices as new budget figures show a near-record tax take, with the Reserve Bank widely expected to raise interest rates on Tuesday.
Read more »
RBA hikes cash rate to 4.6% in bid to tame inflation and slow growthThe Reserve Bank of Australia has raised the cash rate to 4.6% in an effort to curb inflation and slow down the economy.
Read more »
RBA raises interest rates to 4.6 per cent, a 15-year high, as inflation rises to 4 per centThe Reserve Bank lifted official interest rates to 4.6 per cent, a 15-year high, as consumer price inflation rose from 3.5 per cent in July to 4 per cent in August, driven by housing and transport costs.
Read more »