RBA Governor: Unemployment rate needs to rise toward 5% to cool the labor market and thereby ease price pressures.

RBA Governor Michele Bullock said a rise in the unemployment rate would help cool the labor market and ease inflation pressures, but declined to say whether she would support an interest-rate increase next week. Speaking on Tuesday about the current 4.5% jobless rate, Bullock said, "At the moment we think the labor market is a bit tight," adding, "I think somewhere between 4.5% and 5% is probably enough to cool the labor market and therefore ease inflation pressures." Bullock's remarks came two days before Australia's August employment data are released, with economists expecting the unemployment rate to remain unchanged. Bullock said the root problem of too-high inflation is that "the demand side of the economy is outpacing the economy's ability to supply goods and services," and the labor market looking tight is evidence of that. Markets expect the Reserve Bank of Australia's nine-member rate-setting board to resume raising rates at next week's meeting, as prospects fade for a near-term end to the Middle East conflict and inflation pressures remain elevated. After raising rates at its first three meetings this year, the RBA has since held steady, while counterparts in Europe, the US and Japan have all raised borrowing costs in recent weeks. Traders this month raised their expectations for an RBA rate hike There has been speculation of a divide between RBA staff and independent members of the boardwith the former signaling a desire to raise rates. Asked about this, Bullock noted she has only one vote and cannot pre-judge the board's meeting. "I'm not signaling anything. I'm just one person on the board, so I can't tell you what the board wants to do," Bullock said at a Committee for Economic Development of Australia (CEDA) event. "The only thing we've done in the last few weeks is, after the last meeting, emphasize that we see the risks to inflation as skewed to the upside." In a follow-up, Bullock was asked whether, as a board member, she had thought about how she would vote next week. "No, I won't talk about how I might vote," she said with a smile. "Sorry, that shouldn't come as a surprise." Money markets currently price about a 90% chance that the RBA will raise its benchmark rate from 4.35% to 4.6% next Tuesday, a view shared by many economists. Some expect another hike in November, which would take the benchmark rate to 4.85%the highest level since late 2008.