RBA’s Bullock Draws a Hard Line on Inflation, Lifts AUD to Three‑Year High

In her most recent comments on February 11–12, 2026, RBA Governor Michele Bullock underlined a distinctly hawkish attitude, cautioning that interest rates could go higher if inflation stays stubbornly elevated. Following the 25 bps increase to 3.85% at her February 3 press conference, she made clear that any inflation rate with a three in front" is unacceptable. She emphasized at that time that headline inflation at 3.6% and underlying inflation at 3.4% are shown to be persistent, fueled by great demand, continuing supply constraints, and poor productivity.

Bullock reiterated that policy would remain completely data-dependent, giving no definite forward guidance but emphasizing the RBA's readiness to react should entrenched above target inflation develop. February inflation projections have risen to 5.0% from 4.6%, so justifying the central bank's tightening tendency in the face of widespread pricing pressures. Though she agreed that the Australian economy is still basically stable, with a robust labour market and recovering demand, Bullock noted rising unease about allowing high inflation to continue.

Driven by the RBA's hawkish tone and the possibility of further tightening, AUD/USD soared to three-year highs near 0.7147 in currency markets amid speculation of possible pauses from the US Federal Reserve. The decision shows growing policy divergence even as gains are offset by sustained USD assistance from strong US job data. By lowering import costs, the stronger Australian dollar is also helping the RBA's battle against inflation, thereby strengthening the general transmission of more restrictive financial policy into the actual economy.