RBA's Bullock Flags Building Inflation Risks as Rate-Hike Bets Grow
Reserve Bank of Australia Governor Michele Bullock said upside inflation risks may be materialising, pointing to elevated energy prices and excess demand at home.
Australia's top central banker has signalled that upside risks to inflation may be starting to show, pointing to persistently high energy prices and continued excess demand within the domestic economy.
Reserve Bank of Australia Governor Michele Bullock made the remarks during a business lunch, comments that reinforced market expectations of a possible interest rate increase as early as next week.
Bullock also addressed the labour market, noting that an unemployment rate in the range of 4.5% to 5.0% could help keep inflation in check. That suggests some increase in joblessness may be needed from the current level of 4.5%.
The governor's assessment places the central bank's focus squarely on price pressures at a time when financial markets are already positioning for tighter policy. Her remarks indicate that policymakers see little room for complacency on inflation, even as they weigh the path of employment.
With energy costs remaining elevated and demand still outpacing supply in parts of the economy, the central bank appears to be keeping the option of further rate action open. Investors are watching closely for the next policy decision, expected within days.