Bullock's acknowledgment that upside inflation risks flagged in August are now materialising, rather than merely a possibility, leans hawkish ahead of the Board's meeting in just over a week. Her explicit link between Middle East oil price gains and both direct and indirect inflation pass-through gives markets a clearer read on why a further hike remains live, even as she flagged that Australian growth is slowing. The Australian dollar could find some support from the hawkish tone, particularly the reference to other advanced-economy central banks also responding to the same global inflation shock, though the acknowledgment of softening housing and gradually easing labour market conditions tempers how far that repricing is likely to run. Overall, the testimony reads as consistent with, rather than a clear upgrade to, the roughly 70 to 75% probability already priced for a hike at the 28-29 September meeting.---Background:Preview: RBA Gov. Bullock testimony in focus as markets price 70-75% chance of a hike---This is all from Reserve Bank of Australia Governor Bullock's prepared statement. There will be Q&A to follow soon. ---Bullock says the inflation risks the RBA flagged in August are now showing up in the data.Summary:RBA Governor Michele Bullock told the House of Representatives Standing Committee on Economics that inflation has stayed above target since picking up in the second half of 2025, with headline and underlying measures running around or a little above 3.5% over the past yearShe said upside inflation risks flagged in the August Statement on Monetary Policy are now materialising, citing the Middle East conflict, the AI boom and extreme weather as pushing up energy, agricultural and technology-related pricesOil prices have risen sharply again, adding directly to inflation through petrol prices and indirectly as firms pass on higher input costs, a dynamic Bullock said other advanced-economy central banks are also responding toThe unemployment rate stood at 4.5%, with labour market conditions close to, but a little tighter than, full employment, and the employment-to-population ratio near a record highBullock said domestic demand growth is easing as expected, with the full effect of this year's 75 basis points of rate increases yet to be felt, while business investment has picked up strongly on data centre and renewable energy spendingShe reiterated that the Board's task is to determine whether the tightening delivered so far will be enough to return inflation to target in a reasonable time, with the next meeting due in just over a weekReserve Bank of Australia Governor Michele Bullock told the House of Representatives Standing Committee on Economics on Thursday that inflation has remained above target since picking up in the second half of 2025, with both headline and underlying measures running around or a little above 3.5% over the past year. Bullock said the increase partly reflects capacity pressures in the domestic economy, compounded by the conflict in the Middle East, which has lifted inflation directly through petrol prices and indirectly as firms pass higher input costs through to other goods and services. "Inflation is too high," she told the committee, adding that the Board is focused on ensuring it does not become embedded in price and wage-setting behaviour.On the labour market, Bullock said conditions remain close to, but a little tighter than, full employment. The unemployment rate stood at 4.5%, low by historical standards, and the share of the population with a job is close to a record high.Turning to the outlook, Bullock said the RBA's August Statement on Monetary Policy had assessed the risks to its inflation forecast, which had inflation returning to around the midpoint of the target band only by late 2027, as skewed to the upside. She said developments since then suggest some of those upside risks are now materialising. Global cost pressures have increased, with the Middle East conflict, the AI boom and extreme weather events adding upward pressure on energy, agricultural and technology-related prices. Oil and related prices have risen sharply again, and the Bank's business liaison program is picking up widespread reports of firms passing on higher costs, a trend Bullock said needs to remain contained rather than becoming embedded in ongoing price and wage decisions. She noted that central banks in several other advanced economies are responding to the same global inflation shock by raising rates or signalling they may need to.On domestic activity, Bullock said demand growth has eased in the first half of 2026 broadly as expected, with the full effect of this year's cumulative 75 basis points of rate increases yet to flow through given the usual lags in monetary policy. The impact of the Middle East conflict on activity has been relatively modest so far despite weaker confidence, with household spending growth moderating gradually while business investment has picked up strongly, driven largely by data centre and renewable energy spending. Bullock said continued weak productivity growth means the economy cannot grow strongly without adding to inflation pressure, calling it a fundamental challenge for the years ahead. She said the Monetary Policy Board's meeting in just over a week's time will assess whether the tightening delivered so far will be sufficient to return inflation to target within a reasonable timeframe. This article was written by Eamonn Sheridan at investinglive.com.