RBA Governor Warns of Inflation Risks Amid Energy Price Increases

Reserve Bank of Australia Governor Michele Bullock has sounded a warning about inflation risks in the country, citing high energy prices and strong domestic demand as key drivers. Speaking at a business lunch, Bullock noted that the ongoing Middle East conflict has led to prolonged energy price increases, which are contributing to inflationary pressures.

She emphasized that unemployment rates between 4.5% and 5.0% could help bring down inflation by reducing domestic demand outstripping supply. However, Bullock clarified that she is not signaling an interest rate hike during the RBA's meeting next week, but rather highlighting upside risks to inflation.

The governor has repeatedly expressed concerns about inflation remaining too high for too long and becoming embedded in price-setting behavior. The RBA has already hiked interest rates by a cumulative 75 basis points this year, to 4.35%, with markets predicting another 25 bps hike next week.