MNI RBA Preview - April 2022: Patience Tested, Set To Remain

EXECUTIVE SUMMARY

• The RBA will leave its monetary policy settings unchanged at the end of its April meeting. Focus will quickly move to the Bank’s guidance paragraph, with the board likely to reaffirm that it is “prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve,” even as the strength of the labour market persistently outstrips its expectations. Meanwhile, wider global inflationary pressures are well documented, but the Bank has insisted that the inflation backdrop observed in Australia is “different.” Elsewhere, the Bank identified the Russia-Ukraine conflict as a “a major new source of uncertainty” in March, with a lack of clarity on the matter still evident.
• We also note that the latest Federal Budget was stimulatory (albeit within the realms of general expectations), with split sell-side views on the level of immediate spill over when it comes to monetary policy. Note that the impending Federal Election (due to take place in May) adds a further layer of complexity on the fiscal front.
• Market pricing remains much more hawkish than RBA rhetoric.
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