Australia's central bank chief warns inflation risks appear to be materialising

SYDNEY: Australia's top central banker warned on Friday that some inflation risks highlighted by policymakers are now manifesting, attributed to the Middle East conflict and the artificial intelligence boom. Michele Bullock, governor of the Reserve Bank of Australia (RBA), appeared before lawmakers and posed a key question: whether three rate hikes this year would suffice to bring inflation back to target within a reasonable timeframe.

The RBA maintained interest rates at 4.35 percent for the second consecutive meeting in August. However, the RBA singled out the Middle East war and a global data centre investment boom as significant inflation risks, with both developments since then trending positively.

Bullock pointed out that while the Australian economy is decelerating as anticipated, the labour market remains tight. She cautioned that a period of subdued growth in aggregate demand is necessary to alleviate inflation. Market projections suggest a 93 percent likelihood that the RBA will raise rates for a fourth time this year to 4.6 percent during the September 28-29 meeting, potentially reaching 4.85 percent by early 2027.