- We recognized in February that inflation was too high
- The economy is in quite a good position, policy judgments are difficult
- Have to be patient in judging policy
There's been some weakness in the Australian dollar after her comments. It looks like she doesn't want to overreact to near-term data and take a more patient approach.
As a reminder, the RBA hiked the Cash Rate by 25 bps at the last meeting bringing it back to 3.85%. The central bank delivered a hawkish surprise as it signalled two more rate hikes by year-end compared to just one expected by the market at the time.
Today, we got the monthly Australia's CPI and the Trimmed Mean Y/Y beat expectations coming in at 3.4% vs 3.3% prior. The data triggered a hawkish reaction with the Australian dollar rallying across the board on higher March rate hike odds (24%).
After Bullock's comments, traders pared back their bets, with the probabilities of a back-to-back rate hike in March now standing at 13%. The RBA focuses mainly on the quarterly CPI, which is due in April. If the data continues to surprise to the upside, a rate hike in May will be a guarantee.
