Reserve Bank of Australia governor Michele Bullock has returned home to Armidale today, warning that the board “will not hesitate to raise interest rates” if inflation proves more persistent than thought, in her address for the Rotary Club of Armidale Annual Lecture.
Mirroring the assertive tone struck at Tuesday’s monetary policy meeting, the head of the central bank said inflation was “still too high” and services prices, such as rents and insurance, were proving “very sticky”.
The board decided to keep interest rates on hold at 4.35 per cent at the August meeting – where it’s been since November – and push back on expectations of a near-term cut.
“On balance, the board decided to keep interest rates on hold, judging that such an outcome would still meet the board’s mandate to balance its inflation and employment objectives,” Ms Bullock said during her speech at the Armidale Bowling Club today.
“But the board remains vigilant with respect to upside risks on inflation and will not hesitate to raise rates if it needs to,” she added.
Demand for goods and services was still higher than the economy’s ability to supply them, as canvassed in detail in the central bank’s updated economic assessment dropped on Tuesday. This was keeping upwards pressure on prices.
While growth in demand had been slowing, Ms Bullock stressed that was from a high base – with people spending big shortly after pandemic lockdowns ended.
“So even though demand growth has been fairly weak recently, this slowing has not been enough to restore balance in the economy,” she said.
In addition, the central bank was expecting demand to pick up over the next 12 months – though this was uncertain – prompting the RBA to push back its expected timeline for inflation to return to target.
Rotary event coordinator, Andrew Murray said securing Michele Bullock as speaker was a great outcome for the Club.
“We are very honoured to have Michele deliver our annual lecture,” Mr Murray said.
“Rotary will donate the net proceeds from the lecture to the UNE SMART Region Incubator, whose founder community is building the future of the region. To date, these founders have generated $23m investment to the region and over 300 jobs.
“Michele is also very generous with her time and will be visiting the Armidale Secondary College and the UNE SRI while she is here.”
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