The Deputy Chairman of the Federal Reserve of Australia warns: Trust reserves will eventually be exhausted, and interest rate hikes to fight inflation are overdrawing public opinion

The Zhitong Finance App learned that Australian Federal Reserve Vice Chairman Andrew Hauser said that after the bank raised interest rates sharply to curb stubbornly high inflation, the public's trust in the central bank remained stable, which surprised him.

In a speech in Canberra on Thursday, Hauser said: “Over the past 18 months, our overall confidence metrics have been generally stable, or even increased slightly. “In a period of rising interest rates and inflation well above the target range, this result is encouraging, but frankly quite surprising.” He was referring to the Reserve Bank of Australia's inflation target range of 2% to 3%.

The Reserve Bank of Australia raised interest rates for the fifth time in 2026 this week, raising the cash rate to an 18-year high of 4.85%. This could squeeze mortgage holders, who are dealing with rising fuel prices, pressure on the cost of living, rising unemployment, and weakening property markets, all of which are driving consumer confidence into a deeply pessimistic zone.

The Reserve Bank of Australia raised interest rates to the highest level since 2008

Hauser said that since the beginning of last year, the RBA has collected feedback from 12,000 Australians through surveys. He acknowledged that this positive outcome may also reflect the trust the central bank has built up in an earlier period.

The central bank official warned: “These trust reserves may protect trust from poor economic results for a period of time, but they may run out.”

The Reserve Bank of Australia began raising interest rates in February this year to prevent inflation, and inflation began to accelerate even before the US-Iran war triggered an impact on global oil prices. Since the end of 2021, the bank has failed to reach the midpoint of the 2.5% inflation target.

Hauser said, “Unsurprisingly, people's trust in our ability to achieve our goals in the near future, whether looking back over a year or looking forward to a year, has declined drastically.” The Reserve Bank of Australia operates under a dual mission to achieve price stability and full employment.

At the time Hauser made these remarks, Australian Federal Reserve officials were worried about the growing risk that rising inflation expectations might solidify. Last month, he pointed out that more and more companies see 3% to 3.5% inflation as the “new normal.”