Reserve Bank governor Michele Bullock says she is yet to be convinced inflation is on a sustainable path back to target and further interest rate rises could not be ruled out as the bank seeks to curb inflation stoking the nation’s cost-of-living crisis.
Ms Bullock said she was “unfazed” by financial markets pricing in rate cuts in the second half of 2024 and added the RBA would only begin lowering rates when it was confident inflation was on a path to sustainably return to the 2 per cent to 3 per cent target, which it did not expect to happen until late 2025.
Tuesday’s result was as expected by economists, many of whom interpreted the post-meeting statement and Ms Bullock’s press conference as the RBA maintaining a “mild tightening bias”, albeit a milder one than in December. The RBA’s latest quarterly outlook for the economy assumes inflation will fall to 3.3 per cent by June, just shy of the central bank’s 2 per cent to 3 per cent target range, but take another 18 months to fall below 3 per cent andHarry Cruise, an economist at Moody’s Analytics, said “although inflation will keep falling from here, the pace of the improvement will slow. It is often said that the final mile of bringing down inflation is the hardest.
When asked about US pricing, Ms Bullock said the US was “in a different position” to Australia. “They’ve got a stronger economy, they’ve got inflation coming down in other ways for different reasons than we have,” she said.The RBA statement on monetary policy also released on Tuesday showed the bank predicts economic growth of just 1.8 per cent by year-end, from 2 per cent previously, before accelerating to 2.3 per cent next year.
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