MNI RBA Preview - May 2023: RBA On Hold, But Close Call

EXECUTIVE SUMMARY:

• The RBA will look at the information gathered in April including updated forecasts and consider that in the context of material tightening to date and the “long and variable lags”. Thus, the meeting decision is likely to be very close but given that inflation has peaked and that April was the first pause, rates are likely to be left unchanged at 3.6% on May 2. Lowe will speak in the evening following the meeting.
• The meeting statement will also include some indication of the updated forecasts, which will be published in full in the Statement on Monetary Policy on May 5. Forecasts are unlikely to be revised significantly from February. The guidance is also unlikely to change substantially with the RBA noting that inflation is "too high" but has peaked and that it will tighten again if needed.
• If there is another pause in May, then upside surprises to inflation and/or wages are likely to be needed for the tightening cycle to resume. With expectations that inflation will only return to the top of the target band in mid-2025, the tightening bias is likely to be maintained for now and rate cuts in 2023 appear unlikely.

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RBA Preview - May 2023.pdf