Reserve Bank of Australia Deputy Governor Andrew Hunter has issued a stark warning that inflation expectations risk becoming entrenched, a development that could force the central bank to keep interest rates higher for longer, souring sentiment for cryptocurrencies and other risk assets.
Speaking in Sydney, Hunter emphasized that while headline inflation has moderated from its 2022 peak, underlying price pressures—especially in services—remain persistent. He noted that if households and businesses begin to expect continuously higher inflation, it could trigger a self-fulfilling spiral of wage and price hikes, making it significantly harder to bring inflation back to the 2–3% target. "The risk that inflation expectations could rise further is elevated," Hunter said.
The hawkish tone was reinforced by the minutes of the RBA’s June board meeting, released Tuesday, which revealed that members seriously debated a rate hike before deciding to hold the cash rate steady at 4.35%. The minutes flagged "increased risk of inflation expectations becoming embedded," signaling that the bank is prepared to tighten again if upcoming data surprises to the upside.
The Australian dollar climbed and bond yields rose as markets repriced the probability of a near-term rate increase. For crypto markets, the prospect of prolonged restrictive monetary policy poses a headwind. Bitcoin and Ethereum, which have often correlated with risk-on assets, face reduced liquidity appetite as higher rates make yield-bearing instruments more attractive. The RBA’s stance aligns with cautious signals from other major central banks, suggesting that a global shift toward easing is still distant.
The RBA’s next meeting is on August 6, and its decision will heavily depend on upcoming inflation and employment figures. Until then, the crypto market is likely to remain sensitive to macro developments that could delay the long-awaited pivot to looser financial conditions.
