RBA's Bullock warns inflation too high, keeps 3 hikes on table

RBA Governor Michele Bullock warned inflation remains too high and further rate increases cannot be ruled out after three hikes this year.

Reserve Bank of Australia Governor Michele Bullock said inflation remains too high and the central bank is prepared to raise the cash rate further, keeping alive the threat of higher borrowing costs after three increases earlier this year.

"Underlying inflation is still too high," Bullock told a gathering of financial market participants in Sydney on Tuesday. "The board is prepared to act as required to achieve its mandate, including by increasing the cash rate further if needed."

The RBA raised the cash rate three times in the first half of 2026 as it sought to contain price pressures that have proven stubborn. Bullock said a key question in the period ahead is whether those increases are sufficient to bring inflation back to target, as the central bank assesses the impact of fresh fuel price increases driven by escalating tensions in the Middle East.

The hawkish stance puts the RBA at odds with several major central banks that have begun easing, potentially keeping the Australian dollar elevated and adding pressure on rate-sensitive sectors including housing and consumer spending. "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.

Bullock highlighted weak productivity growth as a persistent inflation risk, saying it constrains the economy's ability to grow without generating price pressures. "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.

The governor also noted that the impact of the RBA's earlier rate increases on the housing market had been stronger than anticipated. "The housing market has eased by more than we had anticipated in May," Bullock said, attributing the softening to recent policy developments affecting the housing market and a general decline in sentiment. Even so, she described the pullback as modest following a period of strong growth.

The global environment has added complexity to the RBA's task, Bullock said, with the outlook clouded by the Middle East conflict and its effect on energy prices. "While this makes the task of monetary policy more complex, our objectives haven't changed," she said. "The board remains focused on delivering price stability and full employment."

The RBA's cautious stance contrasts with the Federal Reserve and European Central Bank, which have signaled rate cuts as inflation moderates in their jurisdictions. Australia's inflation has proven more persistent, driven in part by capacity constraints in the domestic economy that had re-emerged before the latest geopolitical shocks.

This article is for informational purposes only and does not constitute investment advice.