Reserve Bank of Australia (RBA) Governor said it is too early to know the economic impact of the ongoing Middle East conflict and what it could mean for inflation in Australia, according to a Tuesday statement by Governor Michelle Bullock on the RBA website.

Bullock said that a supply shock could, for example, add to inflation pressures, but at the same time, a prolonged impact on energy markets could have adverse effects on global economic activity and result in downward pressure on inflation, and hence, it is not obvious how this might play out.

Bullock added that the RBA staff has set out their view of the most likely central case outcome for the major economic variables as part of its discussions for future policy.

The RBA consults a range of perspectives and uses scenario analysis to assess plausible outcomes to inform its judgment in such cases, for example, in May 2025, staff modelled the effects of trade tensions under different assumptions to help the Board consider the issues quantitatively, Bullock added.