MNI RBA Preview - May 2022: Will They Or Won’t They?

EXECUTIVE SUMMARY

• The much firmer than expected Q122 CPI print has tilted the scales towards a cash rate hike at the RBA’s May meeting, The MNI markets team has slight bias towards a 15bp cash rate target hike at this meeting, although we concede that this is a close call
• We don’t see the impending Federal Election as an impedimentary factor to tightening.
• The Bank’s guidance paragraph will be monitored for views re: the velocity of additional rate hikes (assuming a 15bp rate hike is deployed). With a cumulative ~250bp of rate hikes priced over the remaining 8 meetings of 2022 there is a high bar for the RBA to provide an outright hawkish surprise vs. aggressive market pricing.
• The RBA will also make a decision on what it intends to do from the proceeds of maturing bonds held under the bond purchasing schemes employed as part of its response to COVID-19. We expect the Bank to outline a passive run off of maturing bonds held on its balance sheet.
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