RBA governor Michele Bullock backs importance of independence amid Trump-Powell stoush
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More news: Reserve Bank governor Michele Bullock has emphasised the importance of central bank independence, responding to questions about the potential implications of Donald Trump interfering with the US Federal Reserve.
“I think central bank independence is very important,” Bullock said at her Anika Foundation address, when asked about recent reports that Trump was considering firing Federal Reserve chair Jay Powell. Trump has rejected the reports.
"Certainly, what’s going on in the United States is challenging that. But … the Fed is doing what they’re supposed to be doing, which is focusing on the economy,” she said, adding that these actions represented the central bank “preserving their independence”.
“I can’t speak for what goes through Mr Trump’s mind — I’m not sure anyone can,” she added, to laughter.
But she said the “general principal around the would of central bank independence still remains a guiding light”.
Asked about the RBA’s unexpected decision to hold rates steady in July — and whether markets should expect unpredictability from the central bank — she replied: “I wouldn’t say so.”
“What the minutes, I think hopefully point out was the reasons why we decided to hold and that surprising the markets was neither a reason for doing it or not for doing it,” Bullock said.
“It was an observation of the board that the markets were expecting something else. I wouldn’t say that our job is to be unpredictable, our job is to basically do what we think the board things is the right thing to do for the economy.”
The RBA governor also clarified that when monetary policy board members speak publicly, which will happen more frequently as part of the recommendations of the historic review of the central bank, they “are not going to be able to speak for … what the board might do”.
“They certainly will, I think, be able to explain the board’s current decision but they’re not going to be able to front-run just as I can’t,” she said.
RBA governor unsurprised about rise in jobless, adjusts inflation outlook
The news: Reserve Bank governor Michele Bullock has brushed off concerns about the recent unemployment rate rise and has flagged that underlying inflation is likely to take slightly longer than previously expected to reach the midpoint of the RBA’s 2–3% target band.
At an annual address to the Anika Foundation, Bullock said the jump in the jobless rate to 4.3% was not a surprise to the RBA and aligned with its forecasts, despite it being a shock to several economists who believe it backs up calls for a rate cut in August.
She also revealed the RBA no longer expects the fall in trimmed mean inflation over the June quarter to be “quite as much” as forecast in May, based on monthly data released so far.
A new set of forecasts will be published alongside the RBA board’s next interest rate decision on 12 August. The full June quarter inflation figures are due next week, and the RBA expects they will show inflation “declining slowly towards 2.5%”.
The context: The RBA shocked the market by keeping rates on hold at its July meeting, defying widespread expectations of a 25 basis point cut.
Since then, unemployment data has shown a rise in the jobless rate. The vast majority of economists and markets now expect the central bank to deliver a cut at its next meeting in August.
Analysts have been waiting for Bullock to deliver this speech, and for next week’s inflation figures, to get a further steer on the likely path forward for rates.
The RBA expects headline inflation in the June quarter to be “in the lower half of our 2 to 3% target range” though noted this partly reflects temporary cost-of-living relief.
“As that effect unwinds, we expect headline inflation to pick up to around the top of the band at the end of this year and into the first part of 2026,” Bullock said, emphasising the RBA prefers to focus on the trimmed mean measure due to this effect.
She said trimmed mean inflation had been easing but it’s “still a bit higher than headline inflation” though is expected to fall further in the June quarter in year-ended terms.
What she said: “I should note that the RBA can’t wave a magic wand and control how adjustments in the labour market play out,” Bullock said.
“Interest rates are too blunt an instrument for that, and I am not here to claim credit for the fact that the adjustment has so far taken place in a less costly way.”
The source: Reserve Bank speech
