Interest rates: RBA’s Michele Bullock’s run of good news may be about to end

When former Reserve Bank governor Philip Lowe fronted parliament and the media he spoke like what he is: an economist.

From an economic perspective, these are desirable outcomes to bring the economy back to balance. It does not mean, however, they are outcomes the Reserve Bank board would be popping champagne corks over. Yet, with inflation accelerating over the first quarter of the year, economists were expecting the RBA to sound more hawkish.

It also upgraded its forecasts for trimmed mean inflation from 3.6 per cent to 3.8 per cent in the year to June 30, and from 3.1 per cent to 3.4 per cent over calendar 2024. Trimmed mean inflation is the RBA’s preferred measure for price rises that trims away volatile changes to get underlying inflation.The key pressures are the strong jobs market and high petrol prices, which flow through the economy.

She was quick to add the assumptions used in the RBA’s modelling should not be seen as any indication of what the bank intends to do: “Is that the interest rate path that’s eventually going to be actualised? I don’t know.”Certainly, Treasurer Jim Chalmers will be hoping for something sooner, given the next federal election must be held before May 2025.

“Recent data indicate that, while inflation is easing, it is doing so more slowly than previously expected, and it remains high,” its post-meeting statement said. “The board expects it will be some time yet before inflation is sustainably in the target range and will remain vigilant to upside risks.”In her post-board meeting press conference, Bullock elaborated further, outlining what the bank saw as the biggest policy mistake.

NAB head of market economics Tapas Strickland noted there is “little ability to absorb additional upward inflation surprises if the economy remains resilient”; a stimulatory budget could spark a fresh rate rise, which, aside from being a blow to households,

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