Australia's central bank governor said an interest-rate increase this month is possible if the board concludes that inflation expectations are becoming unanchored, and she urged financial markets to be conscious of that possibility.
Speaking at a business conference in Sydney, Reserve Bank of Australia Governor Michele Bullock stressed that the board would not necessarily sit on its hands until the full first-quarter consumer price reading arrives in late April. "Every meeting is live," Bullock said, referring to the policy-making board's next gathering on March 17. "The board will be looking at whether it needs to be moving more quickly."
Market participants have tended to assume the central bank would wait for the first-quarter consumer price report, due on April 29, and then decide on any further tightening at the May 5 board meeting. Bullock said she wanted to "dissuade" markets from relying on that timetable.
She noted current market pricing for the cash rate placed only a 24% likelihood on a quarter-point rise from the present 3.85% at the March meeting. At the same time, those same market prices show expectations for a rise to 4.10% in May and imply rates of roughly 4.26% by the end of the year. The RBA implemented its first increase in February.
Bullock was also asked about the impact of the conflict in the Middle East and the associated rise in oil prices. She pointed out that Australia is a net energy exporter, which provides a buffer for the economy. However, she warned that if higher global energy prices were to persist, that scenario could weigh on consumer demand and economic growth while also exerting upward pressure on inflation.
The governor's comments underline that the timing of further monetary tightening remains conditional on how inflation expectations and global cost pressures evolve, rather than on a fixed calendar. Investors and businesses sensitive to interest rates and inflation will be watching the board's assessment closely ahead of the March 17 meeting.