RBA Governor Michele Bullock has indicated that upcoming inflation data may be higher than anticipated, raising concerns about a potential interest rate reduction in August. The assessment of any rate cut depends significantly on quarterly data set to be released next week, which Bullock suggests could exceed expectations.
During her address at the Anika Foundation fundraising event, Bullock projected a slight decrease in trimmed mean inflation for the June quarter, yet cautioned that the unpredictable monthly Consumer Price Index (CPI) data suggests the decline may not align with previous forecasts made in May. She remains hopeful for inflation to trend downwards to approximately 2.5%, contingent upon supportive data.
This forecast is not likely to be welcomed by numerous Australians, many of whom have been grappling with the impacts of elevated interest rates and the ongoing cost-of-living crisis over the past three years. Despite acknowledging these economic challenges, Bullock conveyed a positive outlook on cost-of-living relief. She noted, “Fortunately, as inflation has decelerated, the labour market has only gradually relaxed, and unemployment remains relatively low.”
Bullock also highlighted that everyday Australians continue to experience financial strain, with prices significantly higher than just a few years prior. She emphasised the importance of ensuring that inflation remains low and stable moving forward, reinforcing that, “Low and stable inflation is beneficial for households, jobs, communities, and the economy.”
In summary, while Bullock remains cautiously optimistic about inflation trends, the next data release will be critical in determining the RBA’s monetary policy direction, specifically regarding any adjustments to interest rates amidst continued economic pressures on Australians.