RBA Warns Inflation Still a Threat Amid Rising Oil Prices

The Reserve Bank of Australia (RBA) is warning that inflation remains too high and may require further interest rate hikes to bring it back under control. In a parliamentary hearing, RBA Governor Michele Bullock stated that developments since their last meeting in August have added pressure on energy, food, and tech prices.

The key drivers of this pressure are the ongoing Middle East conflict, the AI boom, and extreme weather events. The RBA is concerned that businesses may pass on increased costs to consumers, making inflation more persistent.

Bullock noted that the benchmark Brent crude price remains above $US104 a barrel, despite a recent sell-off in oil prices. She emphasized that with no end in sight to the war and price increases, businesses are increasingly likely to pass on costs to consumers.

The RBA has forecast that inflation will return to its target range by the end of 2027, but Bullock acknowledged that this is not assured. If inflation overshoots their forecasts, more rate hikes may be necessary.