FX.co ★ Inflation Risks Keep RBA on Guard: Governor Bullock

The Reserve Bank of Australia emphasized the necessity of curbing demand growth to achieve price stability, following its first interest rate increase in two years. In remarks to lawmakers on Friday, Governor Michele Bullock highlighted that stronger-than-anticipated demand, coupled with ongoing supply limitations, poses a risk of sustaining high inflation levels. She noted that, though the global economy has demonstrated resilience, there remain significant uncertainties due to trade and geopolitical challenges. The central bank raised interest rates by 25 basis points to 3.85%, prompted by a resurgence in inflation after three rate cuts the previous year. Consumer prices have surpassed predictions for two consecutive quarters, consistently remaining above the 2%–3% target range. Core inflation climbed to 3.4% in the fourth quarter, marking its highest level in over a year, with expectations to peak at 3.7% by mid-year before gradually aligning with the target by 2028.