MNI RBA Preview - June 2022: Business As Usual

EXECUTIVE SUMMARY

• The RBA is set to hike the cash rate target for the second consecutive month come the end of its June meeting. The question is whether or not this move will come in a 25bp 40bp step. The sell-side split on this is close, with 10 of the 24 surveyed by Bloomberg looking for a 25bp hike, while 11 look for a 40bp move. Outside of these outcomes, none surveyed by Bloomberg look for the cash rate to be left steady at 0.35%, while the remaining 3 look for a super-sized 50bp move. We don’t hold anything in the way of strong commitment when it comes to providing a definitive view re: a 25bp or 40bp step.
• In isolation, the data released since the May meeting shouldn’t prove inhibitive for the RBA when it comes to the idea of a 40bp hike and would allow the Bank to move back to the traditional 25bp multiples when it comes to the level of the cash rate target. This would also remove the remaining portion of the Bank’s emergency COVID settings. Still, the Bank’s reference to “business as usual” when it came to deploying the surprise 25bp cash rate hike observed in May opens the potential for the Bank to stick to 25bp increments/multiples of cash rate target increases in the time ahead.
• Market pricing surrounding the RBA continues to look aggressive.

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