RBA Deputy Governor Bullock spoke today on “Policymaking at the Reserve Bank” covering both “the monetary policy process” and “the payments system.”

• At the October meeting, the Board was in no doubt that interest rates needed to rise further but there was much discussion regarding the size of the move. Even though inflation, including domestically-driven, is too high and the labour market remains tight and is putting upward pressure on wages, the Board felt that there had been a “substantial rise in interest rates since May” and that there was significant uncertainty around consumption, wages and global growth.
• As it said after the meeting, the RBA expects to tighten policy further in the coming months and that the size and timing will continue to be data dependent. Deputy Governor Bullock reiterated that the Board is determined to return inflation to target. She also stated that the TWI is more important for Australian inflation than the AUDUSD rate and that the former has not depreciated by as much.
• Deputy Governor Bullock noted that the RBA can tighten at a slower pace than other central banks because the Board meets 11 times a year, which is higher than most others. The RBA can achieve similar rate outcomes to other countries but in smaller increments. She emphasised again that the Board needs to focus on domestic economic conditions.
• One particular area of significant uncertainty was what consumers will do with their savings and payment “buffers”. Bullock felt that household decisions could go either way and that there is also a “vulnerable edge” to the impact from falling house prices.