Reserve Bank of Australia Governor Michele Bullock warned lawmakers that the central bank will move again on interest rates if inflation proves persistent. Addressing the Senate Economics Legislation Committee, Bullock emphasized the RBA's conditional stance amid a late-2025 rebound in price pressures.
Bullock said it is not yet certain whether bringing inflation down will require further increases, noting that the bank adopted a data-driven approach in setting policy. The RBA implemented its first rate rise in two years last week, lifting the cash rate by 25 basis points to 3.85%.
"If we need to go up further because inflation is entrenched, the board will do so because that is its primary mandates," Bullock told senators, reiterating the bank's readiness to act should inflationary forces become entrenched rather than transitory.
The most recent increase followed a renewed pickup in inflation through the second half of 2025, with underlying inflation moving back above the RBA's 2% to 3% annual target range. Bullock's testimony highlighted the bank's focus on incoming data in determining whether the recent rise in prices represents a temporary blip or the start of a more persistent trend.
Context and approach
Bullock described the bank's approach as grounded in incoming statistics rather than preset commitments. While the RBA has already tightened policy with the 25 basis point hike to 3.85% last week, the governor made clear that further action would depend on whether inflation remains elevated.
Her remarks to the Senate committee underlined two linked points present in the RBA's recent moves: first, that inflation has rebounded in the second half of 2025; and second, that the board is prepared to raise the cash rate again if the rebound proves persistent.
Implications
- Monetary policy stance remains conditional - future changes depend on data on inflation and price pressures.
- The RBA has recently tightened policy by 25 basis points to 3.85% in response to a rebound in inflation.
- Officials explicitly cited the possibility of additional rate increases if inflation becomes entrenched.
What remains uncertain
- Whether the recent rebound in inflation will persist, requiring more hikes - the governor said that is not yet clear.
- The timing and scale of any further adjustments to the cash rate depend on incoming data on price pressures.