RBA’s Bullock Says Economy Cooling, Unsure If Rates High Enough

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessRBA's Bullock Says Economy Cooling, Unsure If Rates High EnoughAustralia’s central bank chief said there are signs the economy is adjusting as anticipated, though it’s still unclear if this year’s interest-rate hikes are enough to return inflation to target or whether additional tightening will be needed.Author of the article: You can save this article by registering for free here. Or sign-in if you have an account.b(04o8i3si05ltuuxagmt3mn_media_dl_2.png Australian Bureau of Statistics,(Bloomberg) — Australia’s central bank chief said there are signs the economy is adjusting as anticipated, though it’s still unclear if this year’s interest-rate hikes are enough to return inflation to target or whether additional tightening will be needed.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountIn a balanced and wide-ranging speech at the annual Anika Foundation lunch in Sydney on Tuesday, Reserve Bank Governor Michele Bullock highlighted that while the world has become more shock-prone, the economy is more resilient than in the past. She said the key goal is to prevent elevated cost pressures from entrenching inflation.“This does mean that some further easing in the growth of demand is likely to be required if we’re to bring inflation back down sustainably to target,” Bullock said in the text of her speech, referring to the RBA’s 2-3% goal. “A key question in the period ahead is whether the tightening in monetary policy earlier in the year is sufficient to achieve this.”Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againThe RBA raised rates at its first three meetings of the year, trying to restrain resurgent inflation that was accelerating even before the impact of the energy shock triggered by the Middle East conflict. The central bank’s board stood pat at 4.35% at its last meeting and is expected to do so again when the next decision is announced on Aug. 11.Money markets are currently pricing a bit better than a one-in-three chance of a rate hike in two weeks’ time, while fully pricing one by December.“While conditions vary across sectors, the economy overall has adjusted gradually and broadly as expected,” Bullock said. “The board is prepared to act as required to achieve its mandate, including by increasing the cash rate further if needed.”The outlook has been clouded by the inability of the US and Iran to find a way out of their conflict. While oil prices fell steadily after an interim agreement to begin peace talks, a resumption in fighting over the Strait of Hormuz sent it surging again. Global benchmark Brent has since fallen after President Donald Trump said the US and Iran were engaged in talks to end the war.“Even if the renewed disruption to oil supply abates quickly, underlying inflation is still expected to be higher as fuel price rises flow through to other prices,” Bullock said.The governor highlighted a notable quickening in new dwelling inflation in the May monthly CPI, partly reflecting higher fuel and construction costs. She said the RBA’s liaison program showed non-labor cost pressures have continued to pick up, and more firms are looking to pass these costs on.“It’s also important to remember that inflation and capacity pressures in the domestic economy were already too high prior to the recent shock,” she said. “There’s evidence that domestic demand and labor market conditions have been easing as required to bring the economy back towards balance.”This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.The governor said one sector that had been weaker than anticipated at the time of the May forecasts is housing. She said the rate rises were expected to cool prices, but the government’s removal of tax breaks and softer sentiment in general had further weighed on them.Still, she described the fall in prices for existing homes so far as “modest” after a period of strong gains. The declines have been concentrated in Sydney and Melbourne, Bullock said, while pointing out that they still remain around the level seen before rate hikes resumed in February this year.“Notwithstanding the price falls, negative equity remains very limited, affecting less than 1% of borrowers,” Bullock said. “This is not to downplay that this would be stressful for those affected. But it does indicate that financial stability risks are contained.”The governor also looked at the status of various sectors of the economy:The labor market has eased a bit more than expected over recent months, moving a little closer to balance relative to its tight starting point, she said. Still, the RBA continues to assess that some further easing in labor market conditions will likely be required to bring inflation back to targetThere’s limited evidence of a large effect of the spike in oil prices on household spending, she said, noting the government’s temporary fuel tax reduction helped. Timely indicators point to moderate growth in consumption last quarter, broadly as expectedBusiness investment has been stronger than expected, largely driven by investment in data centersBullock again pointed out the difficulties created by weak productivity growth that can’t be influenced by monetary policy.“While this persists, the ability of the economy to grow without generating inflation is constrained, and Australians will continue to experience limited growth in real wages,” she said. “In these circumstances, the best contribution monetary policy can make is to maintain low and stable inflation and support sustainable full employment.”—With assistance from James Mayger and Nasteho Said.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.