RBA Path Hinges on Data Ahead

• Consumer sentiment moved off recent lows in May, with the Westpac–Melbourne Institute index rising 3.5% to 83.0, recovering after April’s sharp decline which had pushed confidence to its weakest point in around 2½ years (80.1).
• Some support came through from cost-of-living relief measures, particularly the temporary reduction in fuel excise, helping households absorb the impact of the RBA’s third 25bp increase delivered earlier this month.
• Household views on finances also improved, with assessments relative to a year ago rising 9.0% to 72.8, while 12-month expectations lifted 10.7% to 93.0.
• Separately, RBA Chief Economist Sarah Hunter reinforced that capacity constraints remain an inflation risk, with businesses expected to pass through higher costs, particularly if elevated oil prices persist.
• Markets currently place around a 20% chance on a June move, though before then attention turns to key domestic releases including employment tomorrow, April CPI and Q1 GDP.