VIEW: ANZ: RBA On Hold Until August

ANZ write “we have reassessed our outlook for the cash rate in light of the RBA’s decision to pause at its April Board meeting and Governor Lowe’s speech on Wednesday. We now expect the RBA to keep the cash rate unchanged until August when we expect a 25bp hike to take it to a peak of 3.85%. Previously we had expected hikes in April and May to reach a terminal cash rate of 4.10%.”

• “Having paused in April, though, the bar for a rate hike in May is high. While labour force, consumer spending and business survey data will all be important, ultimately the Q1 CPI print would need to exceed the RBA’s forecasts to prompt a rate hike in May in our view. The monthly CPI indicator suggests that’s unlikely to be the case.”
• “Inflation and wage data are likely to remain elevated after August, and this will keep risks tilted towards a higher terminal rate. But we expect that weakening global and domestic growth will give the RBA justification to keep rates on hold for an extended period, with an easing in policy unlikely until late-2024.”