Australia's Central Bank Warns of Inflation Risks Amid Energy Price Pressures

Australia's central bank has expressed concerns that inflation risks are materializing, driven by high energy prices and excess demand in the economy. Speaking at a business lunch, Reserve Bank of Australia Governor Michele Bullock noted that unemployment is currently at 4.5%, which could help restrain inflation, but acknowledged some rise might be needed from this level.

Bullock highlighted upside risks to inflation, including the ongoing conflict in the Middle East and its impact on energy prices, as well as domestic demand pressures. She emphasized that these factors have been affecting the economy for longer than anticipated and that excess demand remains a concern.

The RBA has increased interest rates by 75 basis points since February to address inflation concerns, but core inflation is still above the target range of 2% to 3%. Markets expect another rate hike next week, with some anticipating rates peaking at 4.85% early next year.