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The RBA governor has emphasised the board’s vigilance in returning inflation to target.
Reserve Bank of Australia (RBA) governor Michele Bullock has reiterated during the post-meeting press conference that the board’s objective is to bring inflation down to its target band of 2–3 per cent while maintaining market labour gains.
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The June monetary policy meeting saw the RBA continue to hold the cash rate steady at 4.35 per cent and Bullock acknowledged that inflation “has come down a long way” since its 2022 peak in Australia and overseas.
“It reflects the tightening of monetary policy all around the world, and that’s helping dampen demand,” Bullock said.
“That said, inflation is still above central bank targets in many economics, and it is proving to be sticky. The progress in getting inflation down has slowed and Australia isn’t any different.”
Pointing towards the recent flow of economic data since the May meeting, Bullock stated that the data reinforces the “need to remain vigilant to the upside risks to inflation”.
“We still think we’re on the narrow path, but it does appear to be getting a bit narrower,” she said.
“We need a lot to go our way if we’re going to bring inflation back down to the 2 per cent target range. The board does need to see that inflation is moving sustainably towards target, and it will do what is necessary to achieve that outcome.”
When asked about the board’s language pertaining to the use of the words “vigilant/vigilance” and its possible indication of a rate hike, Bullock stated that this was not the case.
Bullock said: “The board wanted to make the point that they are alert to the potential upside risks, and there are a couple of things that haven’t made them jump the gun, they’ve left things on hold.
“One was the monthly CPI in April; it was a bit higher than expected. [However], it’s only a monthly CPI and it doesn’t give you a full picture … but there’s just [been] a few little alerts to suggest that we might need to remain vigilant.”
The governor noted that the upcoming June quarter CPI data will be important in “looking at how the trajectory for inflation is going” along with emerging employment data.
“We’re going to be looking at all sorts of data coming through, but the June CPI is going to be an important one, because [it’s] going to give us [more of a] comprehensive view of what’s going on,” Bullock said.
The June monetary policy meeting marked the fifth consecutive rate hold since the last hike in November 2023. The next decision is slated for 6 August 2024.
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