Australian Dollar: Inflation risks keep RBA on edge – BNY

BNY’s Bob Savage reports that RBA Governor Michele Bullock highlighted a 75bp rise in the cash rate this year to return inflation to target, but noted inflation re-accelerated in late 2025 as growth, a tight labor market and higher Oil prices lifted costs. She warned the Middle East conflict could add to inflation and sees headline inflation peaking above 4.5% in Q2, with underlying pressures elevated until mid-2027.

RBA wary of renewed price pressures

"RBA Governor Michele Bullock has testified on the economic outlook, saying the board has raised the cash rate by 75bp this year to help bring inflation back to target."

"She said inflation had fallen into the target band in early 2025 but then rose again in the second half of the year as stronger growth, tight labor market conditions and higher oil prices pushed costs higher."

"She also warned that the Middle East conflict could add to inflation and modestly weigh on growth, while noting tighter policy is already easing housing market conditions."

"Bullock said headline inflation may peak above 4.5% in the June quarter, with underlying inflation above target until mid-2027."

"Australia saw a sharp improvement in the international trade in goods balance in April – it came in at a surplus of AU$1.791bn from a March deficit of AU$1.024bn."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)