Pressure is growing on the Reserve Bank to lift interest rates again as inflation remains stubbornly high, but governor Michele Bullock knows another rate hike all but guarantees a recession.
You could see, hear and feel the pressure on Reserve Bank boss Michele Bullock at yesterday's press conference, held after an angst-filled decision to do nothing.
"I think the RBA probably should have increased rates a little bit further, probably closer to around 5 per cent," opined Challenger chief economist Jonathan Kearns who, until just over a year ago, was a senior official at the RBA. The other fairly clear takeaway is that the bank won't be an enthusiastic hiker, even if stubbornly sticky inflation eventually forces its hand."There are people out there who have much more definite , and they seem much more convinced that they know exactly what to do," she responded to one question."And the reason it's a challenging time is because we're balancing risks on both sides here.
That pipeline is starting to run out, and there's precious little new work replacing it, with dwelling approvals around decade lows. As Bullock pointed out, if that happens then the commentary from and about the Reserve Bank will be on how quickly it will cut rates, not whether it will raise them again.Meanwhile, the RBA governor hopes Australia can stay on this narrow path, which seems to keep getting narrower every time she steps up for another post-meeting press conference.
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