(Bloomberg) -- Australia’s central bank Governor Michele Bullock said it will take “another year or two” before inflation is sustainably back within the 2-3% target, in a signal policy is likely to remain restrictive for some time yet.
“There is still a high level of uncertainty about the economic outlook and the board remains concerned about the degree of excess demand in the economy,” Bullock said in the Reserve Bank’s annual report published Friday.
The central bank’s August update of forecasts showed trimmed mean inflation, a core gauge of prices, will ease to 2.9% by December 2025, and then 2.6% by 2026. It will release a new round of forecasts next month.
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The RBA raised interest rates by 4.25 percentage points between May 2022 and November 2023 as it joined global peers in tightening policy to try to restrain inflation. While other central banks have begun easing, Australia’s is still waiting for disinflation to take a firm hold. Economists and money markets expect the next move will be down, but not until next year.
The RBA “recognizes the challenging task it faces in bringing inflation back to target in a reasonable timeframe while preserving as many of the gains in the labor market as possible,” said Bullock, whose remuneration totaled A$1.06 million ($702,140) in the year through June 2024. “The board is committed to both goals and believes it can achieve them.”
Bullock’s pay compares with €427,560 ($462,730) for European Central Bank President Christine Lagarde and around $190,000 for Federal Reserve Chair Jerome Powell, making her among the world’s best paid central bank chiefs.
The annual report showed that the RBA’s accounting loss narrowed in the past fiscal year to A$4.2 billion from A$6 billion in 2021-22. Its negative equity position was A$20 billion in the 12 months through June, up from A$17.7 billion.
The RBA didn’t pay a dividend to the government for a third straight year.
The “board’s judgment remains that negative equity does not affect the RBA’s ability to operate effectively or perform its functions, but that it is important that the equity position is restored over time,” the report showed.
It added that the outlook is better as its massive quantitative easing program matures over time. The RBA’s status is unusual as most other central banks typically use a government indemnity.
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