Michelle Bullock held her last public appearance before next week's RBA board meeting today and she struck a decidedly hawkish tone.
A few key points from today’s CEDA fireside chat:
💡 Unemployment between 4.5% and 5% is needed to get inflation back inside the RBA's target band, with unemployment currently sitting at 4.5%, which Bullock described as a bit tight.
💡 The key focus of monetary policy is limiting second-round effects and keeping inflation expectations anchored through the current supply shocks.
💡 The neutral rate is rising around the world as investment drains the saving pool. The recent rise in bond yields is a rise in real yields, not a move in inflation expectations.
💡 AI is adding to demand now, while showing “very few signs” of lifting supply. This may mean the NAIRU will be higher for a while.
💡 When discussing a potential hike, Bullock listed the upside risks from August and said that they appear to be materialising.
Taken together, this is a clear hawkish bias from the RBA’s Governor. The key swing issue that remains before their meeting next Tuesday is the unemployment number out this Thursday. Absent a big jump in unemployment, I can't see the bank keeping rates on hold next week.