RBA Press Conference Highlights Inflation Risks to the Economy

Bob Mason
Published: Feb 6, 2024, 05:19 UTC

RBA Governor Michele Bullock discussed the importance of bringing inflation to the target range during the press conference and viewed risks as balanced.

RBA Press Conference

In this article:


  • The RBA left the Cash Rate unchanged at 4.35% on Tuesday.
  • The first RBA Press Conference focused on inflation risks, employment, and growth forecasts.
  • Before the press conference, RBA Board members surprised the markets with a more hawkish-than-expected Rate Statement.

RBA Press Conference

On Tuesday, RBA Governor Michele Bullock held the first monetary policy decision press conference.

  • We want to see inflation continue to decline, and that’s more important than market pricing. Inflation has a four in front of it, which is too high.
  • Productivity will return to the Australian economy when looking further out.
  • Governor Bullock discounted the impact of tax cuts on consumption, the economic outlook, and inflation.
  • RBA does not want inflation expectations to rise. On that basis, the RBA raised rates in November to mitigate inflation risks to the economy.
  • The RBA hasn’t ruled anything out or ruled anything in vis-à-vis rate decisions.
  • RBA Governor Bullock understands mortgage holders are sweating over the risk of higher interest rates. However, Governor Bullock believes tackling inflation will have more beneficial effects.
  • The RBA needs to ensure progress continues to bring inflation to target.
  • On a scale of 1-10, RBA Governor Bullock ranked her optimism of bringing inflation to target at 5.
  • On Taylor Swift tickets, RBA Governor Bullock noted that people prioritize spending habits, with Taylor Swift tickets a priority for some.
  • The Board believes it can bring inflation to target without adversely impacting the labor market.
  • RBA judges the risks to inflation as balanced, with forecasts showing inflation returning to target by 2025.
  • The RBA Board remains focused on employment, which continues to grow.
  • Board members must be confident inflation will return to the band range before cutting rates.

RBA Rate Statement Maintained a Hawkish Spin

On Tuesday, the RBA left the Cash Rate at 4.35%. However, the Rate Statement maintained a hawkish tone despite softer inflation numbers for Q4.

RBA board members noted that inflation remained too high at 4.1%, attributing sticky inflation to services price inflation. Other salient points from the Rate Statement included,

  • Wage growth may not increase significantly further and remain consistent with the inflation target.
  • The economic outlook is uncertain amidst lingering inflation risks.
  • Central forecasts are for inflation to return to the target range (2-3%) in 2025.
  • Board members expect employment to improve moderately.
  • Household consumption remains uncertain.
  • The Board expects it will take some time for inflation to sustainably return to the target range.
  • Significantly, the RBA did not rule out further interest rate hikes, and policy decisions will depend upon income data.
  • Focal points for the Board include the global economy, domestic demand trends, and the outlook for the labor market and inflation.

The RBA warned the markets of a possible rate hike if economic data warrant tighter monetary policy conditions. Notably, the more hawkish-than-expected minutes could create more monetary policy and economic uncertainty in the near term.

The monetary policy decision and RBA Rate Statement coincided with the early release of the RBA Statement on Monetary Policy.

The Quarterly Statement of Monetary Policy

On Tuesday, the Statement of Monetary Policy highlighted weaker growth and employment forecasts. Significantly, inflation forecasts were also lower.

  • GDP growth forecasts for H1 2024 were down from 1.8% to 1.3%, with full-year 2024 forecasts down from 2.0% to 1.8%.
  • The RBA expects the unemployment rate to rise to 4.2% in H1 2024, up from 4.0%, and to 4.3% by December 2024, up from 4.2%.
  • Inflation forecasts signaled a return to the 2-3% range by December 2025.
  • The RBA revised inflation for June 2024 from 3.9% to 3.3% and from 3.5% to 3.2% for December 2024.

AUD/USD Reaction to the RBA Statements and Press Conference

Before the statements and press conference, the AUD/USD fell to a low of $0.64781 before rising to a high of $0.65084.

However, in response to the statement and the press conference, the AUD/USD fell to a low of $0.64870 before rising to a high of $0.65174.

On Tuesday, the AUD/USD was up 0.47% to $0.65131.

RBA Press Conference


About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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