Bullock Warns of Higher Inflation Amid Oil Price Surge

RBA Governor Michele Bullock warned that underlying inflation remains too high and more rate hikes may be needed to tame prices. She said policymakers are prepared to raise interest rates again if necessary, including increasing the cash rate further.

Bullock emphasized that a key uncertainty is whether the three rate hikes already delivered this year are enough to return inflation to its 2%-3% target band. While the full impact of these increases has yet to be felt across the economy, underlying inflation is still too high and could rise further due to higher oil prices linked to the Iran war.

The RBA's hawkish bias continues to drive market expectations for another rate hike this year, which would take the cash rate to 4.6%. Bullock devoted much of her speech to supply-side shocks, arguing that recent rises in oil prices underscore how premature it is to judge the full economic fallout from the Middle East conflict.