Bullock says Australia's inflation risks are materialising ahead of September 29
RBA Governor Michele Bullock told Australian lawmakers on Friday, September 18 that some upside inflation risks are materialising. Markets had a September 29 rise to 4.60% nearly fully priced, Reuters said.
Reserve Bank of Australia Governor Michele Bullock told a parliamentary committee in Canberra on Friday that the Middle East conflict, the AI boom and extreme weather are lifting energy, agricultural and technology prices, and that she does not know whether the tightening already done is enough to bring inflation back to target. "It may be the same rate is enough to do that," she told the House of Representatives Standing Committee on Economics. "It may be that it is not."
At its August meeting the board held the cash-rate target and said it would increase it further "if upside risks materialise." On Friday she said that "although growth in the Australian economy is slowing, some of these upside risks to inflation appear to be materialising." The pressure she described is coming through oil, weather and the AI boom, not a demand pulse the cash rate sets. Oil and related prices "have increased sharply again and will add directly to inflation," she said, and "there is little sign of resolution of the Middle East conflict."
WTI is higher over one month, three months and the year
- 68%
- 34%
- 9.5%
The RBA's liaison with firms is picking up pass-through: "many firms are passing on higher input costs." Inflation, she said, is "too high." The bank's August forecasts did not bring it back to around the midpoint of the 2–3% target range until late 2027.
The RBA's preferred trimmed-mean measure of annual inflation was 3.6% in July, unchanged from June, according to the Australian Bureau of Statistics. Headline CPI was 3.5%, down from 3.8%. Both sit above the 2–3% target band after a pickup Bullock said began in the second half of 2025. The board has already raised the cash-rate target three times this year, by a total of 75 basis points, to 4.35%, with the last increase in May and an unchanged setting on August 11. She did not commit the board to a fourth move. A key question for the September 29 decision, she said, is whether the tightening so far will be enough to bring inflation back to target in a reasonable time.
Reuters reported that markets implied a 93% chance of a 25 basis-point increase to 4.60% on September 29, and 4.85% by early 2027. The testimony lands in a week when two other large central banks have already moved: the Federal Reserve on Wednesday, September 16 raised its federal-funds target range by 25 basis points to 3.75%–4.00%, and the Bank of Japan raised its policy rate to 1.25%.
Bullock spoke at 9:30 a.m. in Canberra on Friday, which was Thursday evening in New York, after the US close. In Friday trade in Sydney, the S&P/ASX 200 Financials index was down 0.71% as of 1:40 a.m. ET. The iShares MSCI Australia ETF EWA, graded B on etf.net's published method, had already finished Thursday's regular session.
The board publishes its cash-rate decision at 2:30 p.m. in Sydney on Tuesday, September 29. August CPI is due the next day, Wednesday, September 30.
Frequently asked
What did Bullock actually say?
That some upside risks to inflation appear to be materialising, that oil and related prices have increased sharply and will add directly to inflation, and that she does not know whether the rate increases so far are enough.
Where does Australian inflation stand?
The RBA's preferred trimmed-mean measure was 3.6% in July, above the 2-3% target band, with headline CPI at 3.5%.
How much has the RBA already raised rates?
Three increases this year totalling 75 basis points, taking the cash-rate target to 4.35%, with the last rise in May and no change in August.
Are other central banks moving in the same direction?
Yes, in the same week the Federal Reserve raised its target range by 25 basis points to 3.75%-4.00% and the Bank of Japan lifted its policy rate to 1.25%.