Chairman of the Reserve Bank of Australia: Only by raising the unemployment rate to 5% can cool down the labor market and thus ease the pressure on prices

The Zhitong Finance App learned that RBA Chairman Michelle Bullock said that rising unemployment would help cool down the labor market and ease inflationary pressure, but she declined to say whether she would support interest rate hikes next week.

Referring to the current 4.5% unemployment rate on Tuesday, Bullock said, “Currently, we think the labor market is a bit tight.” “I think 4.5% to 5% is probably enough to cool down the labor market and thus ease inflationary pressure.”

Two days after Bullock delivered the above speech, Australia's employment data for August will soon be released, and economists expect the unemployment rate to remain unchanged. Bullock said that the fundamental problem with excessive inflation is that “the economy's demand is directly exceeding the economy's ability to supply goods and services,” and the labor market seems tight, which is proof of this.

The market expects that the Bank of Australia's nine-member interest rate decision committee will resume interest rate hikes at next week's meeting because the prospects for the Middle East conflict to end in the short term are fading, and inflationary pressure is still high. After continuously raising interest rates at the first three meetings of this year, the Bank of Australia has remained on hold since then, while European, American, and Japanese peers have all raised borrowing costs in recent weeks.

Traders raised expectations for the Reserve Bank of Australia's interest rate hike this month

There are speculations that there are differences between the Bank of Australia's internal staff and the independent members of the committee — the former is sending a signal that they want to raise interest rates. When asked about the matter, Bullock stated that she had only one vote and was unable to predetermine a decision before the Committee meeting.

Bullock said at an Australian Economic Development Council (CEDA) meeting, “I haven't sent any signals. I'm only one member of the committee, so I can't tell you what the committee wants to do.” “The only thing we did in the past few weeks was to emphasize after the most recent meeting that we think the risk of inflation is biased upward.”

In a subsequent inquiry, Bullock was asked if, as a member of the committee, she had considered how she would vote next week.

“No, I'm not going to talk about how I might cast,” she said with a laugh. “Sorry, this isn't a surprise.”

Current pricing in the money market shows that the probability that the Bank of Australia will raise the benchmark interest rate from 4.35% to 4.6% next Tuesday is about 90%, and many economists share the same view. Some expect another rate hike in November, when the benchmark interest rate will rise to 4.85% — the highest level since late 2008.