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Bullock has dashed any hopes of a rate cut by the end of the year, despite lingering expectations of a November cut.
Following the Reserve Bank of Australia's (RBA) August monetary policy meeting, RBA governor Michele Bullock emphasised the board's vigilance towards upside inflation risks and attempted to quell expectations of a rate cut by the end of the year.
"Based on what I know today, and what the board knows today, what we can say is that a near-term reduction in the cash rate doesn't align with the board's current thinking.
"We've seen from overseas experience how bumpy inflation can be on the way down, and across the economy, we need to see supply and demand coming back into better balance.
"I understand this is not what people want to hear, I know there are many households and small businesses that are struggling with interest rates where they are. Many people are doing it tough, and we're very conscious of that ... But really the best thing we can do is to bring inflation back down to target," Bullock said.
Bullock confirmed that the board had considered a rate increase during the August meeting, however opted to hold the cash rate at 4.35 per cent, and stated that inflation is forecast to come back into band at the end of 2025.
"... The judgment of the board was that keeping the interest rate where it is and making sure that people understand that a rate cut is not on the agenda in the near term, given what we know, [and] that continued pressure will help keep demand coming back into line with supply," Bullock said.
When asked about markets pricing in a rate cut (some as early as November 2024), and whether or not Australia is heading for a recession, Bullock said: "They're trying to guess what we're going to do, and what I'm trying to tell the markets today is that I think that expectations for interest rate cuts are a little bit ahead of themselves."
Bullock further stated that neither she nor the RBA board expects that the country is heading for a recession, believing that the RBA is still on the "narrow path".
"Having said that, we are data dependent, and there's a number of things ... that could result in the economy slowing much more quickly, and inflation coming down much more quickly than we expect, and we need to be alert to those.
"And if they come to pass, then yes, interest rate cuts would be on the agenda," she said.
The RBA is set to meet for its next monetary policy meeting on 23 September and announce its decision on the afternoon of 24 September.
The August cash rate decision marked the sixth consecutive interest rate hold since its last rate cut in November 2023.
[RELATED: RBA still gripped with uncertainty, leaving cash rate at 4.35%]
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