Macro
RBA's Sarah Hunter Advocates Economic Weakening to Control Inflation
Sarah Hunter, the Assistant Governor for Economics at the Reserve Bank of Australia (RBA), has indicated that achieving the inflation target of 2-3% may necessitate intentionally weakening the economy. This statement comes as the RBA grapples with persistent inflation and a cash rate currently at 4.35% after three hikes in 2026.
Hunter highlighted that geopolitical factors, particularly rising oil prices, could exacerbate inflation expectations, prompting the need for a gap between demand and supply capacity. This approach mirrors strategies from the early 1990s recession, which saw unemployment soar above 10% and prolonged recovery.
Despite a slight easing in inflation data for Q2 2026, Hunter cautioned against overreacting to single data points, emphasizing the tight labor market remains aligned with RBA forecasts. The central bank projects unemployment to rise to 4.6%, a necessary level to stabilize inflation.
Hunter's remarks underscore the RBA's commitment to prioritizing inflation control, even as the property market shows signs of weakening. The RBA's projections indicate that inflation may not return to target levels until early 2028, reinforcing the likelihood of further rate hikes.
FAQ
What is Sarah Hunter's position at the Reserve Bank of Australia?
Sarah Hunter is the Assistant Governor for Economics at the Reserve Bank of Australia (RBA).
What inflation target is the RBA aiming for?
The RBA aims for an inflation target of 2-3%.
What measures does Sarah Hunter suggest might be necessary to control inflation?
Sarah Hunter suggests that intentionally weakening the economy may be necessary to control inflation.
What is the current cash rate set by the RBA?
The current cash rate set by the RBA is 4.35%.
When does the RBA project inflation may return to target levels?
The RBA projects that inflation may not return to target levels until early 2028.