RBA forecasts lower inflation but keeps rate-rise option alive, says Bullock

The Reserve Bank of Australia's new outlook shows inflation falling faster than expected, and Governor Michele Bullock hinted that further rate hikes may not be needed, though she left the door open for additional tightening.

Every second meeting the Reserve Bank of Australia releases forecasts that steer policy; the newest set shows inflation dramatically lower than anticipated three months ago and on course to reach the middle of the 2-3% target band by 2027, while traders price the cash rate near 4.35% at the end of 2028. Governor Michele Bullock, cautious after the missteps of predecessor Philip Lowe, told reporters that this timing is a reasonable point for inflation to be back on target, yet she emphasized that the board is not ruling out further rate hikes if inflation stays above target.

She reiterated that the board did not discuss rate cuts and that another increase could be needed. Chief economist Sarah Hunter highlighted numerous upside risks—including robust global growth, possible Middle-East oil price spikes, lingering energy-price effects, capacity constraints, and El Niño-driven food price pressures—while the primary downside risk is a sharp housing market downturn. Bullock warned against complacency, insisting the RBA will act if required despite the recessionary risk of additional tightening.