RBA Faces Inflation Dilemma Ahead of Key Rate Decision

Australia's Reserve Bank Governor Michele Bullock signaled that the central bank will consider whether its aggressive interest rate tightening campaign has done enough to tame inflation when it meets in two weeks. The decision, expected on September 29, could become a politically bruising moment for the government.

Bullock stated that policymakers will weigh whether current interest rates can return inflation to target within a reasonable timeframe. She acknowledged the strain higher borrowing costs place on households, particularly those juggling mortgage repayments with cost-of-living pressures.

The central bank has been signaling deepening concern that price pressures have persisted too long. Swaps markets are pricing at least two more rate hikes by February, with an over 80% probability the first landing on September 29. This would push the cash rate to 4.6%, its highest since November 2011.