Reserve Bank of Australia (RBA) Governor Michele Bullock has warned about the rapid interest rate cuts.
She claimed that a rapid decrease in rates could risk fuelling inflation once again.
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Bullock’s comments come after the RBA’s first rate cut in four years, reducing the cash rate by 0.25 per cent to 4.1 per cent..
While inflation has eased from a high of 7.8 per cent in December 2022 to 2.4 per cent in the final quarter of 2024, Bullock said that the bank must remain cautious.
“We need to see continued progress in inflation before considering further rate cuts,” she said.
“We didn’t respond as quickly as we should have,” she added.
The RBA’s delayed response has been a point of contention, but with inflation now closer to the target range, the bank is treading carefully.
Despite the recent rate reduction, Bullock made it clear that the central bank will continue monitoring economic data closely.
“We want to be sure inflation stays on track before making any further moves.”.
The bank’s decision to cut rates was influenced by improvements in housing costs, services, and a softening of private demand, but Bullock insists that a return to “sustainable inflation” is key before further easing.
Bullock also expressed skepticism about digital currencies like Bitcoin, stating they do not “serve the purpose of money” due to their instability and slow transaction speeds.
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