RBA’s Bullock discusses plan A and two backups amid inflation concerns

RBA Governor Michele Bullock addressed a senate panel today, emphasizing the importance of controlling inflation despite balanced risks. She underscored the necessity of bringing inflation back down to the target band, warning that if inflation doesn’t appear to be heading in the right direction, “we’ll have to take action.”

In her elaboration on the RBA’s rate-setting approach, Bullock described a “Plan A,” which involves a data-driven methodology, keeping all options open without committing to a specific course of action prematurely. That is, RBA does “not rule anything in or out.”

She also outlined two contingency “Plan Bs” depending on economic developments: one for persistently high inflation, and another for a significant economic downturn.

“If it turns out that inflation is starting to head higher again or it’s much stickier then we won’t hesitate to move and raise interest rates again,” Bullock declared. Conversely, she noted that a weaker-than-expected economy would prompt considerations for easing rates to mitigate deflationary pressures.