Bullock Speech: RBA Governor discusses interest rate outlook after the extended pause
|Reserve Bank of Australia (RBA) Governor Michele Bullock is speaking at the press conference, explaining the reasons behind maintaining the benchmark interest rate at 3.6% following the December monetary policy meeting.
Bullock is responding to media questions as part of a new reporting format for the central bank that started this year.
Please follow the Live Stream of the RBA press conference here.
Key quotes from the RBA press conference
Inflation and jobs data will be important for board meeting in Feb.
Did not explicitly consider a case for a rate hike at this meeting.
Would not put timing on any future move, will be meeting by meeting.
Rate cuts are not on the horizon.
Outlook is for an extended pause or hikes, would not put a probability on it.
Board will do what it needs to do to get inflation down.
If data suggests inflation is not slowing, that will be considered at the Feb board meeting.
Board wants to give signal that risks have tilted to upside.
This section below was published at 03:30 GMT to cover the Reserve Bank of Australia's monetary policy announcements and the initial market reaction.
The Reserve Bank of Australia (RBA) board members decided to leave the Official Cash Rate (OCR) unchanged at 3.6% following the conclusion of the December monetary policy meeting on Tuesday.
The decision came in line with the market expectations.
Summary of the RBA Monetary Policy Statement
Policy decision was unanimous.
Recent data suggest the risks to inflation have tilted to the upside, but it will take a little longer to assess the persistence of inflationary pressures.
Private demand is recovering. Labour market conditions still appear a little tight but further modest easing is expected.
Board therefore judged that it was appropriate to remain cautious, updating its view of the outlook as the data evolve.
Various indicators suggest that labour market conditions remain a little tight.
Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions.
Board’s judgement is that some of the recent increase in underlying inflation was due to temporary factors.
Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.
Economic activity continues to recover.
There are uncertainties about the outlook for domestic economic activity and inflation and the extent to which monetary policy remains restrictive.
Uncertainty in the global economy remains significant but so far there has been minimal impact on overall growth and trade in Australia’s major trading partners.
AUD/USD reaction to the RBA interest rate decision
The Australian Dollar came under intense selling pressure in an immediate reaction to the RBA’s decision before quickly recovering ground. The AUD/USD pair reverts to near 0.6625, as of writing, up 0.06% on the day.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.07% | -0.03% | -0.05% | -0.05% | 0.07% | -0.11% | -0.11% | |
| EUR | 0.07% | 0.05% | 0.00% | 0.03% | 0.15% | -0.04% | -0.04% | |
| GBP | 0.03% | -0.05% | -0.02% | -0.02% | 0.09% | -0.09% | -0.08% | |
| JPY | 0.05% | 0.00% | 0.02% | 0.00% | 0.12% | -0.07% | -0.06% | |
| CAD | 0.05% | -0.03% | 0.02% | -0.00% | 0.11% | -0.07% | -0.06% | |
| AUD | -0.07% | -0.15% | -0.09% | -0.12% | -0.11% | -0.18% | -0.17% | |
| NZD | 0.11% | 0.04% | 0.09% | 0.07% | 0.07% | 0.18% | 0.00% | |
| CHF | 0.11% | 0.04% | 0.08% | 0.06% | 0.06% | 0.17% | -0.01% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
This section below was published on December 8 at 21:45 GMT as a preview of the Reserve Bank of Australia (RBA) policy announcements.
- The Reserve Bank of Australia is expected to hold the interest rate at 3.60% in December.
- The RBA Monetary Policy Statement and Governor Bullock’s words could shed light on the 2026 interest rate path.
- The RBA policy announcements are set to rock the Australian Dollar.
The Reserve Bank of Australia (RBA) is on track to leave the Official Cash Rate (OCR) unadjusted at 3.6%, following the conclusion of its December monetary policy meeting on Tuesday.
The decision will be announced at 03:30 GMT, accompanied by the Monetary Policy Statement (MPS). RBA Governor Michele Bullock’s press conference will follow at 04:30 GMT.
The language in the MPS and Bullock’s press conference will likely ramp up volatility around the Australian Dollar (AUD).
Will RBA hint at a hawkish pivot?
Since the November monetary policy meeting, inflation has surprised to the upside and economic growth has regained momentum.
Both indicators justify the expected rate-on-hold decision this week and suggest that the RBA could hint at the likely end to its easing cycle.
Data from the Australian Bureau of Statistics (ABS) showed last Wednesday that real Gross Domestic Product (GDP) in the third quarter climbed by 2.1% from the same period a year earlier, the fastest since mid-2023 and above the RBA's estimate of trend growth of 2%.
The ABS reported on November 27 that the monthly Consumer Price Index (CPI) in October rose at an annual rate of 3.8%, the highest in ten months and above the market forecasts of 3.6%.
Details of the report suggested the pick-up in inflation has been broad-based, with price pressures in the services sector accelerating. Additionally, annual wage growth held at 3.4%, the level forecast by the RBA to remain at this year.
Following the monthly CPI release, RBA Governor Bullock warned, “If inflation proves more persistent, it would have implications for policy.”
A string of upbeat data prompted money markets to fully price in a rate hike by the end of 2026 last week, according to Refinitiv’s Australian Dollar Interest Rate Probabilities, against expectations of at least one more rate cut early next year seen just a couple of weeks ago.
How will the Reserve Bank of Australia’s decision impact AUD/USD?
The AUD positioning against the US Dollar (USD) suggests that buyers are likely to retain control in the run-up to the RBA policy announcements.
AUD/USD could unleash additional upside if the RBA MPS and Governor Bullock lean more hawkish on the outlook for further easing, hinting at a probable pivot toward tightening.
On the contrary, the Aussie could witness a sharp correction from two-month highs if RBA Governor Bullock refrains from signalling the end to the bank’s easing cycle by sticking to the data-dependent stance.
Dhwani Mehta, Asian Session Lead Analyst at FXStreet, highlights key technical levels for trading AUD/USD following the policy announcement.
“AUD/USD is hanging close to three-week highs of 0.6650, holding its recent bullish momentum. The 14-day Relative Strength Index (RSI) is sitting just beneath the overbought territory, suggesting that there could be scope for further upside.”
“The Aussie pair could see a fresh leg north toward the September 17 high of 0.6707 on a hawkish pivot by the RBA. The next relevant resistance levels are aligned at the 0.6750 psychological level and the 0.6800 round figure. Conversely, any retracements could test the initial support at the 0.6600 mark, below which additional downside will open toward the December 3 low of 0.6553. The line in the sand for AUD/USD buyers is pegged near 0.6530, the confluence of the 50-day and 100-day Simple Moving Averages (SMA),” Dhwani adds.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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