RBA Governor Signals Potential Further Rate Increases
Reserve Bank of Australia Governor Michele Bullock, speaking at the Anika Foundation Fundraising Lunch in Sydney, reiterated that the RBA Board remains prepared to increase the cash rate further if required to achieve its mandate of returning inflation to the 2‑3 % target range. She emphasized that despite a recent temporary rise in oil prices, underlying inflation pressures remain elevated, with headline inflation recorded at 4 % in May, already above the target before the oil price jump.
Bullock noted that the full impact of the RBA’s earlier rate hikes is still unfolding, reflecting the lagged effect of monetary policy. She observed that domestic demand growth has broadly moderated in line with the bank’s expectations and that labour‑market conditions have eased from previously tight levels, yet she cautioned that additional moderation in demand and labour‑market pressures will likely be necessary for inflation to settle sustainably at target.
The governor also highlighted persistent weak productivity growth as a structural constraint on the Australian economy, limiting the pace at which growth can expand without reigniting inflationary pressures.
Market participants are now awaiting the release of Australia’s June consumer price index on Wednesday, which Bullock described as one of the final major inflation readings before the RBA’s next monetary‑policy decision scheduled for 11 August. The August meeting will also publish updated economic forecasts in the quarterly Statement on Monetary Policy.