Australia’s central bank is confronting renewed inflation pressure as Governor Michele Bullock warns that risks previously identified by policymakers are beginning to materialize.
Bullock told lawmakers that inflation remains too high and that developments since the Reserve Bank of Australia’s August meeting suggest upside risks are becoming more pronounced.
The RBA has increased its cash-rate target by a cumulative 75 basis points this year. Bullock said headline and underlying inflation have been around or slightly above 3.5% over the past year, remaining above the bank’s 2%–3% target.
External pressures are complicating the outlook. The RBA identified the Middle East conflict, higher oil prices, extreme weather and the global AI investment boom as sources of additional price pressure. Bullock also said some businesses are passing higher input costs through to customers.
Australia’s economy is slowing, but the labor market remains relatively tight. That combination leaves policymakers balancing weaker growth against the risk that inflation becomes embedded in wages and prices.
The RBA’s Monetary Policy Board meets September 28–29. Markets will watch whether policymakers conclude that the existing 4.35% cash rate is sufficiently restrictive or whether another increase is required.
