MNI RBA Preview - May 2024: Prolonged Hold While Inflation “Sticky”
May-06 07:59By: Maxine Koster and 1 more...
EXECUTIVE SUMMARY:
- The RBA is widely expected to leave rates at 4.35% at its May meeting. There is some chance that the tightening bias will be reinstated following the higher-than-expected Q1 CPI data but we believe that is unlikely given it was only dropped at the last meeting and that the RBA has covered themselves as it “is not ruling anything in or out”.
- Updated staff forecasts will be published with the May meeting statement and even if there are near-term upward revisions to inflation, the timing of the return to target will be key. There are likely to be some near-term revisions but we are not expecting anything material in 2025 and 2026.
- Inflation is moving closer to the band but slower than expected in February and so the Board can’t yet be confident that it is returning “sustainably” to target and it could still “be some time yet” before it does.
- Given the highly uncertain outlook and changes to the RBA Board, it is easy to see rates on hold for all of 2024. With an election due by May 2025, early next year is also tricky for a rate cut but February is still possible.
