Australia’s central bank chief warns inflation risks materialising

Australia's central bank chief, Michele Bullock, has warned that some inflation risks are materializing, according to Reuters. Addressing lawmakers, Bullock pointed to the Middle East conflict and the AI boom as two factors putting upward pressure on prices. With the Reserve Bank of Australia (RBA) having matched a post-pandemic high of 4.35% for its cash rate, the key question now is whether three rate hikes this year would be enough to bring inflation back to the 2%-3% target.

Bullock acknowledged that while it may be enough, there is uncertainty on whether the policy is tight enough to achieve the target. The RBA held rates steady for a second consecutive meeting in August but warned that rates could go higher, citing the Middle East war, global data center investment boom, and extreme weather events as key risks to inflation.

Since August, developments have suggested that while Australia's economy is slowing, some of these inflation risks are appearing.