RBA's Bullock Flags Materializing Inflation Risks, Markets Price 95% Odds of Rate Hike

Reserve Bank of Australia Governor Michele Bullock said on September 22 that upside risks to inflation may be materializing, citing elevated energy prices and persistent excess domestic demand, reinforcing market expectations for a rate hike as soon as next week. Speaking at a business lunch, Bullock said unemployment in a 4.5% to 5.0% range could help restrain inflation, suggesting some rise may be needed from the current 4.5%. She stressed she was not signaling the September 29 policy meeting outcome but highlighting inflation risks, including the Middle East conflict's impact on energy prices. The RBA has raised the cash rate by 75 basis points since February to a post-pandemic high of 4.35%, yet core inflation remains at 3.6%, above its 2% to 3% target. Markets have priced in a 95% chance of a hike to 4.60% next week, with rates peaking at 4.85% early next year.