RBA's 'narrow path' gets narrower with an interest rate rise more ...

You could see, hear and feel the pressure on Reserve Bank boss Michele Bullock at yesterday's press conference, held after an angst-filled decision to do nothing.

Before being peppered with questions, the RBA governor prefaced the discussion by outlining the "complex" economic dilemma the bank's board confronts.

"The recent data have been mixed but, overall, I think they reinforced the need to remain vigilant to the upside risks to inflation," she said ominously.

"We still think we're on the narrow path. It does appear to be getting a bit narrower.

"We need a lot to go our way if we're going to bring inflation back down to the 2-3 per cent target range."

There are lots of people out there offering Bullock and her board members free advice about what they should do, or should have done.

"I think the RBA probably should have increased rates a little bit further, probably closer to around 5 per cent," opined Challenger chief economist Jonathan Kearns who, until just over a year ago, was a senior official at the RBA.

"And, because monetary policy hasn't been tightened enough, they're going to have to wait longer to be able to cut rates."

Kearns doesn't necessarily think the RBA should now scramble to catch up, however he warns that it may not be able to cut rates until mid-2025.

The RBA board discussed hiking rates, it didn't even consider the possibility of cutting them.(AAP: Bianca De Marchi)

One clear message from yesterday's RBA communications was that if rates are to move over the next few months it is almost certain to be up, not down.

Indeed, Michele Bullock confirmed the board had discussed the case for hiking rates at its latest meeting, while "the case for a rate cut was not considered".

The other fairly clear takeaway is that the bank won't be an enthusiastic hiker, even if stubbornly sticky inflation eventually forces its hand.

In fact, Michele Bullock had little patience for those baying for rate hikes now.

"There are people out there who have much more definite [views], and they seem much more convinced that they know exactly what to do," she responded to one question.

"It's not as easy as that. It's a challenging time.

"And the reason it's a challenging time is because we're balancing risks on both sides here."

The obvious, and more immediate, risk is that inflation is still well above the RBA's ultimate target of 2.5 per cent.

The most recent headline number was 3.6 per cent, the RBA's preferred measure is 4 per cent, and both showed signs the decline in price rises was stalling.

The less tangible, but equally real, risk is that another rate hike — or even leaving rates on hold for too long at current levels — could see the economy "snap" in some way, as households and businesses that are just clinging on finally fall down.

It's one of the reasons economic activity lags changes in monetary policy, by at least a year and perhaps as much as two, according to research cited by the RBA.

The construction sector is a prime example, where many companies and subbies are in work because of a huge pipeline of jobs contracted during the period of low rates and the HomeBuilder scheme.

That pipeline is starting to run out, and there's precious little new work replacing it, with dwelling approvals around decade lows.

I asked Michele Bullock whether she was worried this is emblematic of broader lags in the transmission of monetary policy and whether the economy might snap later this year. 

"I hope it won't snap, that's not the aim. But you've highlighted one of the points I think where we're a bit wary," she responded.

"So it's quite possible that the private sector will turn out to be not driving demand very much in the following years. So there is a risk that that has an impact on employment."

As Bullock pointed out, if that happens then the commentary from and about the Reserve Bank will be on how quickly it will cut rates, not whether it will raise them again.

RBA governor Michele Bullock says the board is balancing inflation risks with recession risks.(AAP: Dean Lewins)

Meanwhile, the RBA governor hopes Australia can stay on this narrow path, which seems to keep getting narrower every time she steps up for another post-meeting press conference.

But Australia's central bank boss shows no regrets in not following her more aggressive counterparts overseas — such as Canada, where the unemployment rate is more than 50 per cent higher than Australia's at 6.2 per cent, or New Zealand, which has endured two recessions in just over a year.

"That's what the narrow path is about. We're trying to do it [get inflation down] without having a recession," Bullock said.

"Other countries have made different decisions and think they need a recession to do it. We're trying to do it without having a recession."

At least for now, Michele Bullock still believes it's the recession we don't have to have.