RBA minutes: Eight of nine members backed May hike as inflation expectations risk grew
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RBA minutes show eight of nine board members backed the May rate hike to 4.35%, citing rising inflation risks from the Gulf conflict, with markets now pricing a 75% chance of a further August rise. Earlier: Hunter: Inflation expectations drifting higher is an elevated risk RBA ca
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4 itemsMay meeting, RBA set for third straight hike as Hormuz closure drives inflation surge
The Reserve Bank of Australia (RBA) is set to deliver its third consecutive rate hike on May 5, raising the cash rate by 25 basis points to 4.35%, driven by persistent inflation pressures exacerbated by the closure of the Strait of Hormuz. Per the full note [source], a recent Reuters poll indicates that over a third of economists now expect rates to exceed 4.60% by year-end, a significant shift from previous forecasts. This adjustment reflects heightened concerns over core inflation, which is now forecast to average 3.8% this year, up from 3.1% prior to the geopolitical tensions. The RBA's cautious stance is informed by its recent experience with inflation rebounding swiftly after rate cuts in 2025, prompting a more aggressive approach to monetary policy.
Westpac sees upside inflation risks after RBA lifts cash rate to 4.35% in 8-1 vote
The desk sees the RBA's recent rate hike as a signal of persistent inflation pressures, particularly influenced by geopolitical factors. Per the full note [source], the RBA raised its cash rate by 25 basis points to 4.35%, with an 8-1 vote reflecting a stronger consensus than the previous meeting. However, the dovish tone from Governor Bullock suggests that while further tightening is possible, the June meeting could see a pause. This nuanced stance is critical as it indicates a balancing act between combating inflation and acknowledging potential economic headwinds.
NAB calls June RBA hike to 4.60% as Middle East inflation compounds domestic pressures
The desk anticipates a rate hike from the RBA to 4.60% in June, driven by escalating inflation pressures both domestically and from the Middle East conflict. Per the full note [source], NAB's analysis highlights that the RBA cannot afford to let inflation run unchecked, especially following a significant rise in purchase costs reported in their March Business Survey. This view diverges sharply from peers like ING and CBA, who expect a pause after the recent hike to 4.35%. The upcoming RBA meeting on June 15-16 will be pivotal in determining market sentiment around these forecasts.
AUD faces headwinds above 0.72 as RBA signals pause, TD warns
The Australian dollar (AUD) is likely to face significant resistance above 0.72 against the US dollar, primarily due to a dovish shift in the Reserve Bank of Australia's (RBA) messaging and external economic pressures. Per the full note from TD Securities, the RBA's recent 25 basis point hike to 4.35% was accompanied by a cautious outlook, suggesting a pause in future rate increases unless inflation data exceeds expectations. This dovish pivot, combined with geopolitical risks from the Middle East, casts doubt on the AUD's ability to sustain gains above 0.72, especially given the strong performance of the US dollar supported by hawkish Federal Open Market Committee (FOMC) signals.
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