RBA: May hike likely as inflation risks build – TD Securities
TD Securities’ Global Strategy Team notes the RBA hiked in March citing persistent inflation, strong demand, a tight labour market and higher Oil prices.

TD Securities’ Global Strategy Team notes the RBA hiked in March citing persistent inflation, strong demand, a tight labour market and higher Oil prices. They see a May rate hike as likely if Oil stays above US$100 and pushes inflation above 5% y/y, but emphasize the Bank’s data dependence and uncertainty over the subsequent policy path.

Oil and inflation keep RBA on edge

"The RBA cited persistently strong inflation and demand, a still tight labour market, higher oil prices lifting near term inflation risks, and financial conditions that may not be restrictive enough for its rate hike in Mar."

"In contrast, the case to hold was greater economic uncertainty, weaker than expected consumption, and slowing unit labour cost growth."

"While a May hike looks likely—given forecasts that oil above US$100 could push inflation above 5% y/y mid year—the outlook beyond that is unclear."

"The RBA stressed that future decisions are highly uncertain and data dependent, suggesting the Board is increasingly balancing inflation control against the risk of a sharper demand slowdown."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

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