MNI RBA Review - April 2022: Patience Lost

EXECUTIVE SUMMARY

• The RBA left its cash rate target unchanged, as was universally expected, although the removal of the reference to a willingness to be patient in the Bank’s guidance paragraph provided a hawkish read.
• Its reference to observing data in the coming months has increased the focus (if that is possible) on the Q122 CPI print (due 27 April) & Q122 WPI print (due 18 May).
• The wider sell-side consensus now looks for a 15bp hike in June, which comes after the Q122 CPI & WPI readings, in addition to the passage of the Federal Election with the Bank’s May meeting providing the obvious staging post for such a move (backed up by the Bank’s updated SoMP). A May hike cannot be completely ruled out if Q1 CPI provides a real shock, but that doesn’t seem to be the Bank’s preferred option.
• STIR markets have suggested that the June meeting would be “live” for some time. Sell-side consensus now looks for a 15bp hike in June, so the RBA can get back to traditional 25bp increments thereafter. Note that 35bp of tightening is priced for the Bank’s June meeting, up a touch vs. pre-RBA levels (this is based on the current effective cash rate of 6bp), with a little over 205bp of tightening priced by year end. Interestingly, ~12bp of tightening is priced for the May meeting, with market participants pricing a non-negligible chance of the Q122 CPI print pushing the RBA into hiking in May.
• Click to view full review: MNI RBA Review - April 2022.pdf