RBA Ready to Raise Rates Amid Inflation Worries, Says Governor Bullock

Australia's central bank remains vigilant on inflation and may raise rates if necessary, said RBA Governor Michele Bullock. Core inflation is projected to ease within the target range by late 2025. Bullock highlighted regional economic opportunities in renewable energy, despite challenges from climate change impacting farming communities.

Australia's central bank will not hesitate to raise interest rates if needed to control inflation, its top central banker said on Thursday, reinforcing its hawkish messaging as the pace of underlying inflation remained high. Reserve Bank of Australia (RBA) Governor Michele Bullock, in a speech in her home city of Armidale, reiterated that the bank's board was vigilant regarding upside risk to inflation, after it decided to hold interest rates steady on Tuesday.

The central bank projects core inflation, which ran at 3.9% last quarter, to slow into its 2% to 3% target band toward the end of 2025. "I know this (raising rates) is not what people want to hear. But the alternative of persistently high inflation is worse. It hurts everyone," Bullock said.

The bank has held its policy steady since November, judging the current cash rate of 4.35% - up from the 0.1% during the pandemic - is restrictive enough to bring inflation to target while preserving employment gain. Markets still wager a 46% chance that the bank could begin lowering rates in November. A first easing in December is almost fully priced in.

Bullock spent most of her speech on economic opportunities and challenges in regional Australia. Investment in renewable energy should bring significant economic benefit, including jobs and income streams for landholders, she said, whereas increasing volatility in the weather and rising temperature pose challenges for farmers and the communities.

(With inputs from agencies.)