RBA Governor Bullock warns that inflation remains high, to debate more rate hikes

Bullock made his remarks during a briefing in Canberra, where the Reserve Bank of Australia is bracing for a decision in its next monetary policy meeting. The governor, who sits at one of the world’s most scrutinised central banking desks, made no reference to a specific rate level but underscored that the inflationary pressure still outstrips the policy’s intended target.

Australia’s price index has crept up to the upper end of the RBA’s 2–3% confidence interval after a mild rebound in domestic demand, driven in part by momentum in the housing market and a supply‑chain bottleneck that has continued to exert headwinds on consumer prices. Inflation lagged behind the easing of policy rates in the last two quarters, raising red flag signals for the council that a pause could fuel a runaway cycle.

Governor Bullock’s warning is aimed at the RBA’s Governing Council, which has so far leaned towards a measured approach to rate increases, preferring to keep accommodation accommodative for growth. By signalling a readiness to engage in further hikes if inflation fails to pull back, Bullock is reminding the council that their debates will be anchored around the resilience of price stability rather than the lure of growth alone.

For the markets, the governor’s comments carry two key take‑aways. First, the Australian dollar could see a rattling as traders price in the possibility of a tighter policy stance; past meetings have demonstrated a propensity for the AUD to tighten in the 15 to 30 basis‑point range when the RBA signals an impending rate rise. Second, Australian government yields may tighten ahead of the council’s decision, reflecting the expectation that the policy‑rate could catch up to or outpace the breakeven inflation rate across the bond market.

The stakes extend beyond the financial markets. Higher rates would raise the cost of borrowing for both corporations and households, making loan‑inflated debt more expensive and potentially weighing on the housing market where mortgage servicing costs form a large portion of household outgoings. A stealth rise in rates may also slow the pace of investment, with projects that are sensitive to cost of capital falling into limbo.

The next RBA meeting is slated for late November, and market participants will be looking at a battery of data indices to gauge the governor’s call. Among the most watched will be the next head‑line inflation snapshot, core CPI figures that strip out food and energy volatilities, and labour market data that informs the union of wage‑price dynamics. Additionally, the persistence of supply‑chain pressures, particularly in imported components, may shape market sentiment as the RBA fine‑‑tunes its policy stance for the fourth quarter of 2024.