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RBA leaves door open to more tightening as oil shock fades

Governor Michele Bullock said the cash rate increases already delivered earlier this year may take time to fully show up in inflation, and that underlying fuel-price effects are still expected to feed through.

Reported · Written up by our desk · Central Banks

Reserve Bank of Australia Governor Michele Bullock said the RBA’s focus remains on restoring price stability, while keeping open the possibility of further monetary tightening if inflation proves more persistent than expected, despite an uncertain global environment, according to a speech in Sydney reported by Action Forex.

Bullock said it is too early to judge whether current policy settings are sufficiently restrictive because the full effects of the cash rate increases delivered earlier in the year will take time to materialize. She also noted that even if a recent disruption to global oil supplies turns out to be temporary, inflation risks have not disappeared.

She pointed to expectations that underlying inflation will remain higher as fuel price rises flow through to other prices, adding that inflation and capacity pressures were already elevated before the oil-related shock. Bullock said the RBA is watching whether earlier tightening is enough over the coming months, while emphasizing that the economy still faces significant capacity constraints.

Bullock reiterated that monetary policy cannot solve weak productivity growth, but it can support low and stable inflation alongside sustainable full employment. She concluded that the RBA is prepared to act as required, including by increasing the cash rate further if needed.

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