Michele Bullock has declared “near-term interest rate cuts are not on the agenda”, warning the economy remained too hot and ruling out decreasing the cash rate before Christmas.
Already a subscriber?Reserve Bank of Australia governor Michele Bullock has ruled out a rate cut before Christmas, warning the economy remains too hot, inflation is too high and that means “near-term interest rate cuts are not on the agenda”.
“I think everyone felt that perhaps it was a bit rich valuations in the equity markets, particularly in the United States,” she said, dismissing the recent sell-off as an “overreaction” to one poor US jobs report.
“We’re trying to bring demand back into balance with supply and get the inflation rate back into the target band of between 2 and 3 per cent,” Ms Bullock said.Following a string of big-spending budgets over May and June, the RBA now expects public demand is to increase by 4.3 per cent in the year to December 2024, far higher than its previous forecast of 1.5 per cent.
KPMG senior economist Michael Malakellis said federal government policy was prolonging the deflationary process. While the central bank expects government subsidies to temporarily push headline inflation back within its 2 per cent to 3 per cent target band by the end of this year, it then expects inflation to shoot back above the band in 2025 when the federal and state government support expires.
“Some of these factors have now abated and labour demand has eased, but disinflation has been slow and wages growth has remained persistently high relative to labour productivity outcomes.
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