ANZ note that “a 40bp rate hike was on the table in May and will likely be discussed by the Board in June, though the Board’s stated preference is to return “to normal operating procedures.” This suggests that going more than 25bp in June will require, as Lowe said in his post meeting comments, “a very strong argument to do so.” We think an upward surprise of 1% Q/Q growth in tomorrow’s Wage Price Index (WPI) could be enough to get the RBA over the line for 40bp, though if it comes in at our forecast of 0.8% Q/Q that prospect will recede. There is further important labour market data before June, with employment on Thursday and the national accounts measures on 1 June. With the Board “continu[ing] to be guided by the evidence on both inflation and the labour market” surprises in these data may be enough to support a 40bp move even without a very strong WPI.”
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