RBA Deputy Governor Michele Bullock said in a speech that “further increases in interest rates will be required” to meet the inflation target. Meanwhile, the “size and timing of future increases” will depend on the data.
She added that inflation is “increasingly broad based” and it “won’t peak until the end of the year”. After that, RBA expects ” rising interest rates and cost-of-living pressures to drive a moderation in consumption that brings demand more in line with supply”. And that should help to get inflation back to target “over the next couple of years”.
Bullock also discussed four uncertainties around the central forecasts. Firstly, in the international environment, a “significant concern” is the “downside risks in China”. Second is what the current high inflation and cost-of-living pressures might do to price and wage expectations in Australia. Third is the behavior of households as interest rates and inflation rise. Fourth is around energy and other supply shocks that could boost inflation and lower growth.
