RBA Governor Michele Bullock revealed in a speech today that the board “explicitly considered” another rate hike during Tuesday’s meeting. Although they decided to hold rates steady, Bullock stressed that RBA “will not hesitate” to hike if necessary.
Bullock highlighted two main points from the meeting. First, despite weak economic growth, the gap between aggregate demand and supply is “larger than previously thought,” leading to “persistent inflation.” Second, demand growth is expected to “pick up over the next year,” though there is significant uncertainty about this outlook.
Due to these factors, the Board’s inflation target timeline has been “pushed out”. “We don’t expect to be back in the 2–3 percent target range until the end of 2025 – over a year away,” Bullock stated. This delay prompted the board to consider another rate hike to ensure inflation continues to decline.
Ultimately, RBA decided to keep interest rates unchanged, believing this would balance their inflation and employment objectives. However, Bullock emphasized that the Board remains vigilant regarding upside inflation risks and “will not hesitate to raise rates if it needs to.”
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