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MNI RBA Review - May 2023: Services Inflation & Wages Key To Outlook

MNI BRIEF: RBA Hikes 25bp, Cuts "Months Ahead" From Guidance
MNI: RBA Inflation Strategy to Protect Labour Gains

EXECUTIVE SUMMARY:

  • The RBA hiked rates 25bp to 3.85%, bringing cumulative tightening to 375bp, after pausing in April to gather more information on economic developments. The Board was generally expected to keep rates at 3.6% following Q1 CPI data showing headline and underlying inflation easing but expectations were not unanimous.
  • The meeting statement is little changed from April, except for the addition of some of the revised forecasts, the discussion of services price pressures and importantly the emphasis that inflation return to target in “a reasonable timeframe”. The tone seemed to shift towards a greater urgency regarding inflation and that it won’t reach 3% when expected.
  • The rate outlook is likely to depend heavily on the quarterly CPI releases, as they include services whereas the monthly one doesn’t, and the RBA’s quarterly forecasts to ensure that inflation will return to target as expected. Thus, the next “live” meeting is likely to be August as Q2 CPI prints on July 26 and new forecasts are due at that decision.

Click to view full review:

RBA Review - May 2023.pdf



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