The past four years of above-target inflation had been a cautionary tale for the Reserve Bank board, Ms Bullock said on Tuesday. <\/p>\n
“The longer it is out of target, the more concerned that the board becomes,” she told a fundraising lunch at the Anika Foundation in Sydney. <\/p>\n
“I think it is quite at the front of their minds. In the May forecast we had it coming back under three (per cent) towards the end of 2027, and that’s a long time to be above target.” <\/p>\n
Ms Bullock said if the oil price shock from the Middle East conflict dragged on and expectations of price pressures became more ingrained, she was concerned the Reserve Bank’s job of bringing inflation under control would become even harder. <\/p>\n
Following her prepared speech to the event, in which she said the board was prepared to raise interest rates further to get inflation under control, markets pared back expectations for another hike in August to 20 per cent. <\/p>\n
That was because the main message from her speech was that growth in demand was already slowing down, HSBC Australia chief economist Paul Bloxham said. <\/p>\n
“This is part of the plan,” Ms Bullock said. <\/p>\n
“This is what interest rates are designed to do. They’re designed to slow demand so that it’s more in line with growth in supply, and we alleviate those pressures.” <\/p>\n