Michele Bullock has strongly hinted interest rates could go up again in coming months in her first historic board meeting as Reserve Bank governor.
Interest rates on Tuesday were left on hold at an 11-year high of 4.1 per cent.
But Ms Bullock has suggested the pain may be far from over with inflation in August climbing to 5.2 per cent, up from July’s 4.9 per cent level.
‘Inflation in Australia has passed its peak but is still too high and will remain so for some time yet,’ Ms Bullock said.
‘There are significant uncertainties around the outlook.
‘Services price inflation has been surprisingly persistent overseas and the same could occur in Australia.’
Michele Bullock has strongly hinted interest rates could go up again in her first board meeting as Reserve Bank governor
The August increase marked the first monthly deterioration in the annual headline inflation rate since April – with the cost of living worsening for the second time since it peaked at a 32-year high of 8.4 per cent last December.
Ms Bullock strongly hinted another rate rise was possible to get inflation back to target by June 2025, as Australians grapple with a 13 per cent increase in electricity and gas bills and double-digit rises for bread and dairy products.
‘Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks,’ she said.
‘Returning inflation to target within a reasonable timeframe remains the board’s priority.
‘High inflation makes life difficult for everyone and damages the functioning of the economy.’
The futures market is worried, with investors who bet on monetary policy now expecting a rate rise in early 2024.
National Australia Bank is expecting a rate rise in November following the release of inflation data for the September quarter, making it the only one of the Big Four banks – for now – to be forecasting another rate increase.
Ms Bullock last month replaced Philip Lowe as Australia’s most powerful banker, following anger at the RBA’s 12 rate rises in little more than a year, with the last increase occurring in June.
This marked the most aggressive pace of monetary policy tightening since 1989, causing monthly mortgage repayments to surge by 63 per cent since the cash rate rose from a record-low of 0.1 per cent.
Tuesday’s board meeting was the first ever chaired by a woman since the Reserve Bank debuted in 1960.
Interest rates on Tuesday were left on hold at an 11-year high of 4.1 per cent (pictured is a stock image)
The futures market is worried, with investors who bet on monetary policy now expecting a rate rise in early 2024
Ms Bullock replaced Philip Lowe on September 18, after his suggestion in 2021 that rates would stay on hold until 2024 ‘at the earliest’ led to Treasurer Jim Chalmers declining to extend his term to 10 years.
From next year, a specialist monetary board will decide interest rates, with six out of nine members to be part-timers outside the Reserve Bank.
Former RBA governor Ian Macfarlane is concerned Ms Bullock could be outnumbered, leading to her defending a rate rise she potentially disagreed with.
Inflation worsens again in August
AUTOMOTIVE FUEL: Up 13.9 per cent in year to August
GAS: Up 12.9 per cent in the year to August
ELECTRICITY: Up 12.7 per cent in year to August
BREAD, CEREAL: Up 10.4 per cent in the year to August
DAIRY PRODUCTS: Up 10.1 per cent in the year to August
INSURANCE, FINANCIAL SERVICES: Up 8.8 per cent in the year to August
RENTS: Up 7.8 per cent in the year to August
Source: | This article originally belongs to Dailymail.co.uk