Reserve Bank of Australia Governor Michele Bullock said a more substantial monetary policy tightening is the right response to tame demand-driven inflation.
The remaining inflation challenge is increasingly homegrown and demand driven rather than inflation caused by supply-side disruption, she said at the Australian Business Economists Annual Dinner on Wednesday.
"A more substantial monetary policy tightening is the right response to inflation that results from aggregate demand exceeding the economy's potential to meet that demand," said Bullock.
Bullock noted that the monetary policy will have limited influence over inflation driven by global supply disruptions.
She also expressed concern over the challenge posed by the rapid wage growth in the battle against high inflation.
"We still have to bring inflation back down to target while preserving as much of the gains made in the labour market over the past few years as possible", said Bullock. "We are still seeking to tread that narrow path."
