In a speech today, RBA Governor Michele Bullock reaffirmed that the central bank is unlikely to cut interest rates in the near term, provided the economy evolves as anticipated.
Bullock emphasized that the Board remains “vigilant to upside risks to inflation” and that monetary policy will need to stay “sufficiently restrictive” until there is clear evidence that inflation is moving sustainably towards the target range.
Although inflation has fallen significantly from its peak, it remains above the midpoint of RBA’s 2–3% target range, with underlying inflation, as measured by the trimmed mean, still at 3.9% in June.
RBA aims to bring inflation back to target without jeopardizing the labor market gains made in recent years, navigating what Bullock described as the “narrow path.”
The central bank’s August forecast anticipates underlying inflation returning to the target range by the end of 2025, a “slightly slower” timeline than previously projected. While the labor market remains relatively tight, Bullock noted that it is expected to “ease gradually” over the next few years as the economy adjusts.
