RBA Set to Hike Rates Again as Inflation Concerns Grow

The Reserve Bank of Australia (RBA) is set to raise interest rates again to combat inflation, but this time it's not just about strong demand. The recent rise in prices for food, housing, and healthcare has raised concerns that supply chain disruptions and global events are driving up costs.

The author notes that a rosemary and garlic butterflied chicken cost $70 at a local farmers' market, which may have been due to factors such as geopolitics and bird flu precautions rather than strong demand. This raises questions about how the RBA can control inflation when price rises are not driven by consumer spending.

RBA Governor Michele Bullock has stated that the current 4.5% unemployment rate needs to sit between 4.5% and 5% to get the job done, and core inflation is growing at 3.6%. The bank's credibility depends on its ability to control inflation, which anchors expectations and helps deliver low prices.

The author argues that the RBA must take decisive action to curb demand by raising interest rates further, even if it means slowing down economic growth. This will require balancing the need to control inflation with the risk of hurting the jobs market.