Why the Market Thinks Michele Bullock is Bluffing on Rate Hikes

The topic is interest rates

Wednesday, 17 June 2026, at 5:08 am

Michele Bullock announced that the interest rate will stay at 4.35 percent. The Reserve Bank made this decision.

Michele Bullock often says that raising the interest rate is the main tool to lower inflation.

But she has another tool - her words.

After the Reserve Bank board decided not to raise the interest rate, they used their secondary tool.

It started with the statement after the meeting.

The board said it will do what is necessary to achieve price stability and full employment.

The board will raise the interest rate if needed.

Michele Bullock said that not raising the interest rate now will give the Reserve Bank time to see how previous increases affected the economy.

When she spoke, Bullock wanted to make it clear that further rate hikes are possible.

She said the decision does not rule out more tightening in monetary policy if needed to bring down inflation.

The board will focus on the data and what it says about the future and risks.

Between now and the next meeting, the Reserve Bank will get more inflation numbers and unemployment figures.

Bullock made the bank's position clear.

She told reporters that inflation is still too high.

Not raising the interest rate now will allow the board to see how previous increases are affecting the economy.

Michele Bullock's announcement was expected.

The market is not changing its bets on further rate hikes.

Despite tough talk, traders still think the odds of an August rate rise are low.

The Reserve Bank kept the interest rate at 4.35 percent as the economy slows down.

The market thinks there is a 50-50 chance that rates will rise again.

This is what the major banks think.

The Commonwealth Bank's analysts think the Reserve Bank is done with rate hikes and will cut rates next year.

ANZ and NAB agree, expecting rate cuts in 2027.

Westpac is the only one that still expects two more rate hikes.

Its economics team thinks it will take a weakening economy and better inflation outlook to stop further rate hikes.

Is the economy in a downturn?

Most economists do not expect further rate hikes because they think the economy is weakening.

Consumer and business confidence are low, and the housing market is slowing.

The economy is affected by house prices, which are impacted by interest rates.

When property prices rise, people feel richer and spend more.

If property prices fall, people are less likely to spend.

The RBA governor would not say if the economy is already contracting.

The bank will keep talking about the threat of further rate hikes until inflation is under control.

They do not want consumers and businesses to expect rate relief and then need to raise the cash rate again.

After three rapid rate hikes, the governor hopes her words will do the rest.

The bank may shift its language to a more neutral stance later in the year.

If most economists are right, the bank may start talking about rate cuts by the end of the year.

Mortgage borrowers can hope for relief in their repayments after this point.

Wednesday, 17 June 2026, at 5:08 am

Wednesday, 17 June 2026, at 8:24 am

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