RBA's Bullock says timely return to inflation target may need tighter policy, as unemployment hits 4.7%

Reserve Bank of Australia Governor Michele Bullock said interest rates may need to rise further to bring inflation back to target in a timely way, in conference remarks published on Friday 16 October.

The remarks come from an overview Bullock wrote with RBA senior research manager Anthony Brassil for the bank’s annual research conference, held in Sydney on 8 and 9 October under the Chatham House rule, The Nightly reported.

“To bring inflation back to target in a timely way, monetary policy may need to be tightened – but that weakens demand in the near term,” Bullock said. She said slower disinflation “prolongs the costs of inflation, and increases the risk that inflation becomes embedded in expectations and behaviour”. She also said weaker activity may mean that unemployment and underemployment are “already increasing”.

The RBA raised the cash rate to 4.6%, a 15-year high, on 29 September.

The Australian Bureau of Statistics reported on Thursday that the seasonally adjusted unemployment rate rose to 4.7% in September from 4.6%. About 39,000 fewer people were employed, and the participation rate fell to 66.8%. AAP said unemployment was at a five-year high and above economists’ forecast of 4.6%.

The Nightly reported that market pricing for a rate rise at the RBA’s next meeting, on 3 November, fell from 27% to 16% after the jobs data.

Assistant Governor Chris Kent is due to speak at a Commonwealth Bank conference on Monday, AAP reported. Head of payments Ellis Connolly is due at an Australian Finance Industry Association conference on Tuesday, and Deputy Governor Andrew Hauser is scheduled to give a speech on Wednesday.