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The Reserve Bank Board meets next week on June 6. The meeting is live in that the case for a further rate increase is likely to be seriously discussed. However, we expect the Board to decide to hold the cash rate steady at 3.85% while continuing to emphasise its tightening bias.
The May RBA meeting minutes provided a fairly mixed assessment of what was labelled a ‘finely balanced’ decision between a pause and the eventual outcome of a 25bp rate hike. It was interesting to note renewed concern around the medium-term path for inflation, specifically the upside risks – persistent services inflation, strong population growth (as evinced by ongoing strength in permanent and long-term net arrivals) and pressure on rents. Also noted was that, having inflation return to the top of the target range by mid-2025 leaves “little room for upside surprises… given that infl...
The central bank’s updated forecasts signal the cash rate has hit its peak, economists reveal.
It has been a busy but highly-informative week, with the RBA, FOMC and ECB all meeting and a slew of significant data releases in between.Beginning in Australia, the RBA’s 25bp rate hike came as a surprise to ourselves and markets. Crucial to this decision was the Board’s interpretation of the Q1 CPI report, focussing on the strength of inflation amongst service components despite the moderation in the headline and trimmed mean measures seemingly running ahead of the Board’s expectations. With inflation rightly noted as being uncomfortably high, there was a greater emphasis on “the im...
The RBA highlights the key to the policy debate – the risks to the inflation forecasts from sticky services inflation. The Reserve Bank’s May Statement on Monetary Policy shows that the Bank has lowered its growth and inflation forecasts for 2023 from the February Statement.