RBA's Bullock: Inflation too high to consider rate cuts

Reserve Bank of Australia (RBA) Governor Michele Bullock said on Thursday that Australia's core inflation is "too high" to consider interest-rate cuts in the near term. Bullock reiterated that there's still some way to go before prices return sustainably to target, per Bloomberg.  

Key quotes

Policy will need to remain restrictive until there is more confidence in inflation.

There is still some way to go in returning inflation sustainably to target band.

Our forecasts suggest a sustainable return to target will occur in 2026.

The word 'sustainably' is important because it recognizes that we need to look through temporary factors that influence the headline inflation rate.

Given the tightness in Australia's labor market, along with our assessment that the level of demand still exceeds supply in the broader economy, we expect it will take a little longer for inflation to settle at target.

If the data that we're seeing and the information we're getting from our liaison and so on suggests that inflation is picking up again, it's not going to follow that trajectory, it's going in another direction, then that would be a very big red flag for us. 

Market reaction 

At the time of writing, the AUD/USD pair is trading 0.02% lower on the day to trade at 0.6499.