Bullock: RBA prepared to raise rates again if necessary

Bullock offered the following comments during her press conference:

• The central bank had only two options on the table: holding rates steady or a 25 bps rate hike, according to Bullock.
• She indicated that the RBA would hike rates again if necessary.
• Inflationary pressures are anticipated to persist for longer than previously forecast.
• Domestic capacity pressures are the driver behind inflation.
• One upside risk to inflation has already materialised, and two more are developing.
• Excess demand must be reduced, but a recession is not the central forecast.
• The August CPI figure should not be given too much weight.
• Financial conditions are considered restrictive by policymakers.
• If inflation declines, further rate hikes might not be necessary.
• Bullock noted that the bond market continues to react in an orderly fashion, with close monitoring ongoing.

Several of Bullock's remarks moderated the hawkish tone of the decision on raising the cash rate to 4.60% today.

Firstly, she cautioned against placing "too much emphasis" on the upcoming inflation data due tomorrow. This serves as a warning that a single strong CPI reading should not be taken as a signal for another rate increase.

Secondly, she described financial conditions as "restrictive," implying that current policy is already effectively curbing demand. While subtle, this comment carries more weight when combined with her other remarks.

Finally, Bullock stated that today's hike could be the final one this year if no additional upside inflation risks emerge or intensify.

Market pricing for November still indicates around 41% probability of another 25 bps hike, little changed from before the decision and press conference.

AUD/USD has since declined from about 0.7015 to 0.6980, likely reacting to Bullock's signal that today's rate increase does not necessarily start a new tightening cycle.