Inflation in Australia may be near peak, but there are many risks - RBA

The Reserve Bank of Australia deputy governor Michele Bullock said Wednesday that inflation in Australia might soon reach a peak of the cycle. She also noted that inflation could continue to climb fueled by energy and rent prices and the geopolitical situation.

Assessing economic outlook, Michele Bullock, Deputy Governor of the Reserve Bank of Australia, said more interest rate increases would be necessary to bring inflation down from a 32-year peak of around 8.0%.

Last week, Australia's central bank hiked interest rate by 25 basis points to a nine-year peak of 2.85%. The RBA has now lifted its cash rate by an aggressive 275 basis points since May. 

According to the deputy governor, further increases in interest rates will likely be needed. However, the pace and size of rate hikes will vary depending on the further figures. 

Bullock expected higher borrowing costs and global economic slowdown would tackle inflation.

She highlighted a variety of risks and economic uncertainties, such as global economic shocks, slowing economic growth in China and reaction of citizens to rate hikes and falling home prices.

The major concerns about high inflation are electricity prices, which are rising faster than it was expected as supply pressures weigh on the market. 

In her speech, Bullock emphasized that the planned increase in retail electricity prices would lead to a rise in consumer price inflation by one percentage point by September 2023 and another half a percentage point by 2024, according to current estimates.