Key facts
- Australia's inflation remains too high, according to RBA Deputy Governor Andrew Hauser.
- Hauser stated the Reserve Bank of Australia has more work to do to reduce inflation.
- Lower global oil prices from a potential Middle East resolution would be a welcome development.
- The RBA has raised interest rates three times this year.
- Headline inflation slowed to 4.0% in May, but trimmed mean inflation rose to 3.6%.
Australia's central bank has more work to do to tame inflation, which remains "far too high," according to Reserve Bank of Australia Deputy Governor Andrew Hauser. In a speech discussing the Phillips curve, Hauser explained that the board's decision to raise interest rates began in February due to concerns that economic demand was exceeding supply, generating inflation.
Hauser noted that lower global oil prices stemming from a potential resolution of the Middle East conflict would be a welcome development, helping to lower and flatten the Phillips curve. However, he cautioned that a full resolution is not yet assured and that the central bank still has work to do.
Headline inflation in Australia slowed to 4.0% in May, but the trimmed mean measure, which excludes volatile items, rose to 3.6%, both well above the RBA's target band of 2% to 3%. The unemployment rate has edged up to a 4-1/2-year high of 4.5% in April, indicating some cooling in the labor market.
In parallel, ECB chief economist Philip Lane stated that euro zone inflation may remain above the bank's 2% target until the first half of 2027, even with a Middle East peace. ECB policymaker Peter Kazimir also indicated that the central bank still has work to do, and Bank of England policymaker Alan Taylor supports an extended hold on interest rates due to economic weakness and Middle East conflict uncertainty.