RBA Sounds Inflation Alarm: Rate Hike Expected as Soon as Next Week
Australia's central bank warned of upside risks to inflation, citing high energy prices and excess demand. Reserve Bank of Australia Governor Michele Bullock said that unemployment between 4.5% and 5.0% could help restrain inflation.
Bullock emphasized that the Middle East conflict has had a lasting impact on energy prices and domestic demand remains strong. The RBA's policy board is concerned about inflation being too high for too long, which risks becoming embedded in price-setting behavior.
The central bank has increased the cash rate by 75 basis points since February, taking it to a post-pandemic high of 4.35%. Core inflation remains at 3.6%, above the RBA's target range of 2% to 3%. Markets expect a 95% chance of another interest rate hike next week and see rates peaking at 4.85% early next year.