Bullock Flags Inflation Risks Amid AI Boom and Middle East Tensions
Australia's central bank chief Michele Bullock has warned that inflation risks are materializing. Speaking before lawmakers, Bullock stated that some of the upside risks to inflation flagged by policymakers have started to appear. The Middle East conflict and an artificial intelligence boom are putting upward pressure on prices.
Bullock emphasized that while the Australian economy is slowing down as expected, the labor market remains tight. She added that a period of subdued growth in aggregate demand is needed to bring inflation back down to target. Inflation has been a concern for policymakers, and Bullock's comments suggest that further interest rate hikes may be necessary.
The Reserve Bank of Australia (RBA) held interest rates steady at 4.35% for the second time in August, but singled out the Middle East war and global data centre investment boom as key risks to inflation. Since then, both have moved in an inflationary direction. Markets imply a 93% chance that the RBA will lift rates for a fourth time this year to 4.6%, reaching 4.85% by early 2027.