Bullock Hints at August Rate Hike Amid Persistent Inflation Pressures

Reserve Bank governor Michele Bullock has signaled that an interest rate hike is on the agenda for the August meeting. She emphasized the need to prevent elevated cost pressures from entrenching inflation, citing ongoing underlying inflation pressures as a key concern.

Bullock also warned about the long-term impact of poor productivity growth across the economy. Australian productivity has flatlined since 2021, with actual falls in areas such as housing construction and mining. She noted that setting monetary policy had become more difficult due to major economic shocks like the COVID pandemic and Russian war against Ukraine.

Despite some uncertainty around key inflation figures to be released on Wednesday, Bullock stated that underlying inflation has evolved 'broadly as we expected', although it remains too high. The bank has lifted rates three times this year, taking the official cash rate to 4.35 per cent. Bullock made clear that ongoing capacity pressures and weak productivity growth would continue to weigh on the country.