Bullock Speech: RBA Governor speaks on interest rate outlook after the expected 25 bps cut

Reserve Bank of Australia (RBA) Governor Michele Bullock is addressing the press conference, explaining the reason behind the interest rate cut to 3.85% in the May policy meeting.

Bullock is responding to media questions as part of a new reporting format for the central bank that started this year.

Key quotes from the RBA press conference

Must now keep inflation down, well placed to do so.
This is the right cut for now, more adjustments are possible.
Was a consensus decisions, discussed holding rates or cutting.
Did discuss 25 bps or 50 bps.
Do not know if there will be long series of cuts.
Cannot say where the cash rate will end up, does not endorse market pricing.
Was an argument for 50b bps, was not strongest argument in the room.
We were blown out of the water by the scope of US tariffs.
If continue to see inflation coming down, that would offer room to lower rates further.

Economic Indicator

RBA Press Conference

Following the Reserve Bank of Australia’s (RBA) economic policy decision, the Governor delivers a press conference explaining the monetary policy decision. The usual format is a roughly one-hour presser starting with prepared remarks and then opening to questions from the press. Hawkish comments tend to boost the Australian Dollar (AUD), while on the opposite, a dovish message tends to weaken it.

Summary of the RBA monetary policy statement

Escaltion of global trade conflict a key downside risk to economy.
Global growth outlook downgraded, uncertainty has increased due to US tariff policies.
Trims core domestic inflation forecasts, unemployment seen slightly higher.
Lower inflation, higher unemployment forecasts based on market assumption of total 85 bps rate cuts.
Swift easing in trade tensions could see faster global growth, less rate cuts domestically.
Market services inflation eased by more than expected, disinflation was broadly based.
Housing inflation also easing, upside risks to inflation have not materialized.
Trade weighted a$ broadly unchanged since Feb, providing little support to GDP growth.
Economy has performed much as forecast, but household consumption looks softer than expected.
Consumers remain price sensitive, behavior expected to persist for some time.
Trimmed mean inflation seen at 2.6% June 2025, 2.6% June 2026, 2.6% June 2027.
GDP growth seen at 1.8% June 2025, 2.2% June 2026, 2.2% June 2027.
Household consumption growth seen 1.4% June 2025, 2.2% June 2026, 2.4% June 2027.
Unemployment seen at 4.2% June 2025, 4.3% June 2026, 4.3% June 2027.
Wage Price Index seen at 3.3% June 2025, 3.1% June 2026, 3.0% June 2027.
Cash rate assumed at 4.0% June 2025, 3.2% June 2026, 3.2% June 2027.
Labor market still assessed to be tight, broader capacity pressures have eased.

AUD/USD reaction to the RBA interest rate decision

The Australian Dollar meets fresh supply on the RBA’s decision. The AUD/USD pair is losing 0.43% on the day to trade at 0.6425 as of writing.

Australian Dollar PRICE Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.03%	-0.04%	-0.07%	0.09%	0.42%	0.22%	-0.09%
EUR	0.03%		0.00%	-0.05%	0.13%	0.47%	0.26%	-0.06%
GBP	0.04%	-0.00%		-0.04%	0.12%	0.44%	0.28%	-0.02%
JPY	0.07%	0.05%	0.04%		0.16%	0.49%	0.28%	0.04%
CAD	-0.09%	-0.13%	-0.12%	-0.16%		0.34%	0.13%	-0.15%
AUD	-0.42%	-0.47%	-0.44%	-0.49%	-0.34%		-0.20%	-0.48%
NZD	-0.22%	-0.26%	-0.28%	-0.28%	-0.13%	0.20%		-0.28%
CHF	0.09%	0.06%	0.02%	-0.04%	0.15%	0.48%	0.28%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

This section below was published on May 19 at 22:45 GMT as a preview of the Reserve Bank of Australia (RBA) policy announcements.

The Reserve Bank of Australia is set to cut the interest rate by 25 bps to 3.85% in May.
Australian central bank Governor Michele Bullock’s comments and updated projections will hold the key.
The RBA policy announcements would spike up volatility, rocking the Australian Dollar.

The Reserve Bank of Australia (RBA) is set to lower the Official Cash Rate (OCR) by 25 basis points (bps) to 3.85% from 4.1% after concluding its May monetary policy meeting on Tuesday. The decision will be announced at 04:30 GMT.

The updated economic forecast will be published alongside the policy statement, while RBA Governor Michele Bullock’s press conference will follow at 05:30 GMT.

With the rate reduction already priced in, traders will closely scrutinise the central bank’s updated economic projections and Governor Bullock’s comments for the next direction on interest rates and the Australian Dollar (AUD).

Focus on RBA’s next interest rate move

The recent series of Australian economic data releases have pushed back against markets’ pricing of more interest rate cuts by the RBA this year.

The Australian economy added 89K new jobs in April, beating estimates of a 20K addition by a wide margin, while March's reading was revised to show the addition of 36.4K jobs instead of 32.2K previously reported. The Unemployment Rate remained unchanged at 4.1% in April.

Meanwhile, Australia’s first-quarter Consumer Price Index (CPI) rose 2.4% compared to the same period last year, coming in higher than the market expectations of a 2.2% increase, and unchanged from the 2.4% rise in the previous quarter.

Trimmed Mean CPI, the RBA’s closely-watched inflation gauge, rose 0.7% on a quarter-over-quarter (QoQ) and 2.9% on an annual basis. The RBA has an inflation target range of 2%-3%.

The Wage Price Index advanced 3.4% annually in the first quarter, exceeding the estimate and the prior reading of 3.2%. On a quarterly basis, wages increased by 0.9%, surpassing the 0.8% forecast.

The nation’s labor market remains strong while the underlying inflation is elevated, which could prompt the RBA to signal prudence on the policy outlook.

Besides, the revisions to the inflation and growth outlook will also help gauge the RBA’s path forward on interest rates.

Previewing the RBA policy decision, TD Securities (TDS) analysts said: “Overnight indexed swaps (OIS) markets have also fully priced in a 25 bps cut. Of interest will be the RBA's assessment of the risks around tariffs. We see risks of minor downgrades to GDP, but doubt that CPI will shift materially.”

How will the Reserve Bank of Australia decision impact AUD/USD?

RBA Governor Michele Bullock is expected to caution about the economic and inflation outlook, particularly in light of the US tariffs. Therefore, she could reiterate, “have to be careful not to get ahead of ourselves on policy.” Bullock’s cautious remarks could revive the momentum of the AUD/USD recovery.

If Bullock raises concerns about the economic outlook while hinting at further rate cuts, the Aussie is likely to come under intense selling pressure, resuming its downside toward the 0.6300 level.

Dhwani Mehta, Asian Session Lead Analyst at FXStreet, highlights key technical indicators for trading AUD/USD following the policy announcement.

“AUD/USD remains confined in a range between the 200-day Simple Moving Average (SMA) and 50-day SMA heading into the RBA showdown. The 14-day Relative Strength Index (RSI) holds above the midline, currently near 53, keeping the bullish potential intact.”

“A dovish cut by the RBA could send AUD/USD lower toward the 50-day SMA of 0.6333, below which the 100-day SMA at 0.6299 could be tested. If the selling pressure intensifies, the 0.6250 psychological level will be the line in the sand for buyers. Conversely, buyers need acceptance above the 200-day SMA at 0.6452 to resume the recovery toward the November 25 high of 0.6550, followed by the 0.6600 threshold,” Dhwani adds.

Central banks FAQs

What does a central bank do?

Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.

What does a central bank do when inflation undershoots or overshoots its projected target?

A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.

Who decides on monetary policy and interest rates?

A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.

Is there a president or head of a central bank?

Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.

Source: Fxstreet