Reserve Bank of Australia (RBA) Governor Michele Bullock has issued a stark warning that inflation is likely to rise further in the near term, reinforcing the central bank's hawkish stance. Speaking in Sydney, Bullock pointed to persistent domestic cost pressures—especially in services, rents, and tight labor markets—that could keep consumer prices elevated. The RBA's latest projections forecast inflation remaining above the 2–3% target until late 2026, and Bullock did not rule out additional interest rate hikes if needed. The cash rate currently stands at 4.35%.
This cautionary outlook comes alongside a fresh analysis from Rabobank, which suggests that the Australian dollar is entering a new phase as the RBA nears the terminal point of its tightening cycle. Rabobank strategists argue that with the peak rate in sight, AUD movements will increasingly depend on relative global dynamics rather than domestic policy. The bank is closely watching crosses such as EUR/AUD and AUD/JPY, noting that interest rate differentials that once supported the Aussie may narrow, making the currency more sensitive to commodity prices and risk sentiment.
For Australian households, the prospect of prolonged high rates adds pressure on mortgages and disposable income, while businesses face uncertainty in borrowing costs. In currency markets, the evolving narrative suggests traders should look beyond AUD/USD and prepare for heightened volatility in cross pairs. The interplay between Bullock’s inflation fight and Rabobank’s peak-rate thesis paints a complex picture for the Australian economy and its currency.
