ANZ are now looking for a 15bp rate hile at the May 3 meeting, citing the "higher than expected CPI".
- Inflation pressures have momentum and have broadened.
- A cash rate target of 0.1% is inappropriate against this backdrop.
ING:
- There is also now increasing justification for the first move being more substantial than we first considered likely.
- Taking the cash rate target to 0.5% with a 40bp hike from the current 10bp would seem to make more sense now than a 15bp hike to 0.25%, which bond markets might now view as a derisory response to the inflation surge and the record low unemployment rate.
- The AUD 's recent dip also makes more room for the RBA to hike more aggressively, and arguments for the "front-loading" of policy make as much sense for Australia as they do for the United States.
JP Morgan:
- projecting a 15bps RBA cash rate hike next week
- from 0.1% to 0.25%
- “CPI delivered significant upside through food, housing, and transport,”
- “While occurring in the expected (and not particularly policy-sensitive) areas, there is enough uplift on core inflation to force the RBA to move further ahead of wage data.”
DB:
- We now expect the RBA will hike by 15bps at the May meeting, and follow up with a 50bp hike in June
- it should actively consider a 40bp hike in May, followed by a 25bp hike in June. We cannot rule that scenario out (and neither should the RBA Board), but it is not our base case.
- Australia's inflation dynamics have changed. The Q1 CPI shows the RBA has a (very) narrow window of opportunity to avoid a US- style inflation spiral. Federal election or not, it should act now.
Once again Australia lagging behind NZ.
