FX.co ★ Inflation Risks Prevail in Australia: RBA Governor Bullock

In a recent press briefing following an interest rate announcement, Reserve Bank Governor Michele Bullock highlighted ongoing concerns in the Australian economic landscape. Despite inflation remaining within target for two consecutive quarters, potential threats loom due to high unit labor costs and sluggish productivity, factors that could elevate inflation beyond anticipated levels. Governor Bullock underscored the importance of acquiring additional data—specifically the June quarter Consumer Price Index, updates on the labor market, and global economic trends—before implementing further measures. The board shared a consensus on direction but differed on timing, with six members opting to maintain rates and three advocating a rate cut, driven by softer economic data and heightened global risks. While fears of a severe global downturn linked to trade tensions have somewhat abated, the international economic environment remains unstable, particularly after the recent tariff escalations between the U.S. and China. Bullock pointed out that Australia’s stronger economic ties with China provide some degree of protection against U.S.-induced disruptions. The Reserve Bank of Australia remains vigilant, steadfast in pursuing its objectives related to inflation and employment amid the prevailing global uncertainties.