Reserve Bank of Australia (RBA) Governor Michele Bullock said in a statement released during the Asian trading session on Tuesday that supply shocks are difficult for monetary policy to deal with. Bullock added, “Policy needs to deal with second-round effects on inflation.”

Additional remarks

AI boom is adding to excess demand in Australian economy.

Current correction in house prices in line with past episodes.

Unemployment of 4.5% to 5.0% would probably ease pressure on inflation.

Believe neutral rates are rising around the world, pushing up real bond yields.

A$ is reflecting commodities, interest differentials.

I am not signalling anything on policy, up to board.

Inflation risks are materialising from Middle East, excess demand at home.

Market reaction

There is a slight positive reaction by the Australian Dollar (AUD), following RBA Bullock’s remarks. As of writing, AUD/USD is marginally higher to near 0.7122 after recovering early losses.