Michele Bullock Claims Australia's Inflation Keeps Interest Rates High
- The U.S. Federal Reserve recently reduced its interest rates for the second time this year.
- The Reserve Bank of Australia has not cut rates in 2024 and plans no reductions until next year, citing high underlying inflation.
- The differing inflation rates between the U.S. and Australia explain the contrasting monetary policies.
On November 8, 2024, the Federal Reserve in the United States cut interest rates by 0.25 basis points, marking the second reduction this year. In stark contrast, the Reserve Bank of Australia (RBA) has not implemented any rate cuts in 2024 and indicated that further cuts are unlikely until early next year. RBA Governor Michele Bullock explained that Australia's underlying inflation is still too elevated to warrant a decrease in rates, in contrast to the United States, where inflation is currently lower. Despite the U.S. rate cuts, their cash rate remains between 4.50-4.75 percent, still higher than Australia’s cash rate of 4.35 percent. The gap between inflation rates is significant, with the U.S. benefiting from lower inflation, giving them the flexibility to cut rates without increasing the risk of inflation. This situation has stirred political discourse, with critiques directed at the Australian government's economic strategies and how inflation figures are presented to the public. The underlying inflation rate, a more crucial measure according to Bullock, is a key determinant in the RBA's rate decisions, contrasting with less meaningful headline inflation figures that are often manipulated for political gain.