Bullock Speech: RBA Governor speaks on policy outlook after the expected interest rate hike

Reserve Bank of Australia (RBA) Governor Michele Bullock is addressing the press conference, explaining the reason behind raising the key interest rate by 25 basis points (bps) to 4.85% from 4.60% in the November policy meeting.

Key quotes from the RBA press conference  

Rate increase was necessary to reduce inflation. 

Growth must stay muted, unemployment to climb more. 

Some hardship now will avoid more pain later. 

Voters favoring pause perceived greater downside risks. 

Those favoring a hold wanted to wait longer for data. 

Inflation is largely set for the next year. 

Not an ideal situation to be in. 

Probably best to pause and assess incoming data. 

Monetary policy will be effective, requires time to take effect. 

Unemployment remains relatively low, job growth continues. 

Don’t see economy weakening at this point. 

Those on hold weren’t dismissing a hike but wanted additional data. 

No intention to push economy into recession. 

No wage price spiral expected. 

A$ has tracked interest differentials, pass-through to import prices delayed. 

This increase might not suffice, but it’s less evident. 

Not definitely hiking rates again, preserving options. 

Uncertain how high rates must rise. 

Board makes policy choices, not trying to shape expectations. 

No forward guidance, market to interpret. 

This section below was published at 03:30 GMT to cover the Reserve Bank of Australia’s monetary policy announcements and the initial market reaction.

The Reserve Bank of Australia (RBA) announced on Tuesday that it raised the Official Cash Rate (OCR) by 25 basis points (bps) to 4.85% from 4.60% after concluding its November monetary policy meeting. The decision aligned with the market expectations.

This is the the RBA fifth interest rate hike of 2026, its highest level in 18 years. 

Summary of the RBA Monetary Policy Statement

Today’s decision reached by majority.

With revised inflation outlook and ongoing upside risks, board decides further tightening of financial conditions is necessary to support inflation return to target. 

Cash rate target hikes since start of year have tightened financial conditions. 

AI-related spending fuels sharp rise in tech goods prices, many goods and services see persistent inflation. 

Inflation now expected to stay above 3% for next year with rising risk of entrenched higher inflation expectations. 

Capacity constraints seem slightly tighter than earlier thought, with signs that increased fuel costs are being reflected in prices of other goods and services. 

Forecasts show output growth slowing further over the coming year, easing capacity pressures and aiding inflation return to target. 

Unemployment rate forecast to increase more than expected in August projections. 

Growth in Australia’s key trading partners has exceeded expectations as AI investment boost offsets Middle East conflict impact. 

RBA’s Statement on Monetary Policy

RBA forecasts GDP growth of 1.6% in Q4 2026, 1.6% in Q2 2027, 1.3% in Q4 2027, 1.5% in Q4 2028.

RBA forecasts unemployment at 4.7% in Q4 2026, 4.8% in Q2 2027, 4.9% in Q4 2027, 5.1% in Q4 2028.

Cash rate expected above average 4.7% in Q4 2026, 4.9% in Q2 2027, 4.8% in Q4 2027, 4.8% in Q4 2028.

RBA forecasts CPI at 4.5% in Q4 2026, 3.7% in Q2 2027, 2.7% in Q4 2027, 2.4% in Q4 2028.

RBA lifts near-term GDP forecasts on data centre investments, lowers long-term outlook.

Forecasts trimmed mean CPI at 3.6% in Q4 2026, 3.5% in Q2 2027, 2.9% in Q4 2027, 2.6% in Q4 2028.

AUD/USD reaction to the RBA interest rate decision

The Australian Dollar attracts some sellers in an immediate reaction to the RBA’s decision. At the time of writing, the AUD/USD pair is down 0.20% on the day at 0.6980.

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