May 23 – RBA Surprises With Another Hike

RBA Recap & The Australian Economy

  • The RBA took the markets by surprise with a 25 basis point hike at its May Meeting, taking the cash rate to 3.85%.
  • The goal to return inflation to target within a “reasonable timeframe” seems like it will be a prominent theme for the RBA over the months ahead.
  • What constitutes a reasonable timeframe and how is Australia currently tracking?
  • Unemployment remains at historical lows with a trend in the dominance of full-time roles vs part time roles.
  • With services inflation proving sticky, the consumption behaviour of consumers will be a key influence on future monetary policy.

Market Dynamics

  • Uncertainty has reduced since the collapse of SVB and overseas liquidity concerns.
  • A rise in outright term deposit and NCD rates has been driven by markets repricing after the RBA hike and a recent pick up in the demand for funds.
  • It will be interesting to see if the repayment of TFF will increase ADI’s appetite for longer term.

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Curve Team
Jack Pedersen