In her first official meeting as governor of the Reserve Bank of Australia (RBA), Michele Bullock confirmed that the official cash rate will remain steady at 4.1%. The decision was in line with expectations from economists and financial players, signaling a continuity in policy direction from her predecessor, Philip Lowe.
Bullock’s statement echoed Lowe’s (NYSE:) previous remarks, emphasizing that the fight against inflation has not been abandoned. She acknowledged the recent surge in petrol prices, which is known to motorists across Australia, and its potential impact on inflation. “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks,” she said.
Despite the recent turbulence in financial markets, including the crash in bond prices, increase in oil prices, and drop in share markets, Bullock aimed to offer certainty using familiar language to investors, business operators, and households. This approach aligns with the role of a central bank governor to maintain calm during economic upheavals.
Under Lowe’s leadership, the RBA had decided not to raise interest rates as high as some inflation hawks would have preferred for the sake of keeping as many Australians employed as possible. Bullock affirmed this strategy by sticking to Lowe’s script. “Returning inflation to target within a reasonable timeframe remains the board’s priority,” she reiterated.
While maintaining the status quo on interest rates for now, Bullock also acknowledged that higher rates could bring down inflation more quickly. However, she warned that such a move could lead to significant job losses and businesses shutting down, potentially wiping value from retirement and property portfolios.
The new governor’s first meeting signals a continuation of Lowe’s policies. However, there are indications that the RBA board under Bullock may be set for a major shake-up. The nature and impact of this potential restructuring remain to be seen.
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