🍎 🍕 Less apples, more pizza 🤔 Have you seen Buffett’s portfolio recently?Explore for Free

RBA says inflation implications of US election on Australia hard to judge

Published 11/06/2024, 06:07 PM
Updated 11/06/2024, 06:15 PM
© Reuters. FILE PHOTO: Reserve Bank of Australia's governor Michele Bullock speaks as she faces the House of Representatives Standing Committee on Economics at Australian Parliament House, Canberra, Australia, August 16, 2024. REUTERS/Tracey Nearmy/File Photo

SYDNEY (Reuters) - Australia's top central banker said on Thursday it was hard to judge the inflation implications of the U.S. election for Australia at this stage, but policymakers would be watching closely and responding as necessary.

Appearing before lawmakers, Reserve Bank of Australia Governor Michele Bullock said the central bank had not yet changed its outlook for inflation, which is only expected to return to its target band sustainably in 2026.

"We cannot be setting policy on the basis of things that could happen or might not happen," Bullock said. "I think we have to wait and see what actually does happen in terms of these events and respond as necessary."

Former U.S. President Donald Trump will return to the White House with ambitious plans for broad import tariffs and additional tax cuts that analysts see delivering a short-term boost to the U.S. economy, but also higher inflation and larger budget deficits.

When asked whether Trump's policies would mean higher interest rates for longer in Australia, Bullock said she did not have a view on that.

Australia's central bank has held its policy steady for a year, judging the current cash rate of 4.35% - up from the 0.1% during the pandemic - is restrictive enough to bring inflation to its target band of 2-3% while preserving employment gains.

Headline inflation slowed to 2.8% in the third quarter, back in the target band for the first time since 2021, but that was mostly due to government rebates on electricity bills.

But underlying inflation came in at 3.5%, still some distance above the mid-point of the target, leading the central bank to maintain its hawkish rhetoric, saying it is not ruling anything in or out on policy.

Swaps imply the first easing is most likely to come in May next year, lagging other major economies.

© Reuters. FILE PHOTO: Reserve Bank of Australia's governor Michele Bullock speaks as she faces the House of Representatives Standing Committee on Economics at Australian Parliament House, Canberra, Australia, August 16, 2024. REUTERS/Tracey Nearmy/File Photo

Bullock said the central bank had yet to do very explicit scenario analyses on what a Trump presidency means for monetary policy because things could go different directions.

"It might be inflationary in some ways, but it might be deflationary other ways if China ends up badly affected by this," Bullock said.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.