Another Close Reserve Bank of Australia Cash Rate Decision Looms

A pedestrian moves past the Reserve Bank of Australia (RBA) building in Sydney, Australia, on Oct. 18, 2022. (Lisa Maree Williams/Getty Images)

Mortgage holders in Australia will be crossing their fingers this week for another month of interest rate relief.

The board of the Reserve Bank of Australia (RBA) is due to meet on Tuesday for what’s shaping up to be another close call between another 25 basis point hike or a second month of staying on the sidelines.

In April, the RBA kept the cash rate on hold after hiking 10 times in a row in its bid to chase down high inflation.

The central bank decided to pause to allow its increases to ripple through the economy, recognising that interest rate movements don’t take effect immediately, but said it was prepared to tighten further if incoming data called for it.

The board has since observed still-hot but cooling inflation data, a robust March jobs report, ongoing resilience in the business sector, and a turnaround for home prices.

There’s little consensus among economists in the wake of the quarterly consumer price index that resulted in inflation sinking to seven per cent annual growth from 7.8 per cent in the quarter prior.

Some are convinced the central bank has done enough but others are expecting a little more tightening next week or in the months ahead.

After the decision on Tuesday afternoon, RBA Governor Philip Lowe will likely provide more context for the decision during a speech in Perth later that evening.

Assistant Governor Luci Ellis will also deliver a speech in Western Australia’s capital on Wednesday.

At the end of the week, the bank will release its Statement on Monetary Policy, which is released four times a year and outlines its view of economic conditions at present and where they might be headed in the future.

Earlier in the week, CoreLogic’s home value index will likely dominate the agenda after it recorded an improvement in March - breaking a 10-month streak of declines.

Also on Monday, CommSec’s state of the states report will be released, which ranks the economic performance of states and territories.

Melbourne Institute’s inflation gauge will be closely watched on Monday.

The Australian Bureau of Statistics will drop a few important datasets this week, including retail trade on Wednesday, international trade data on Thursday, and lending indicators on Friday.

Plus, there’s one more week to go before Australian Treasurer Jim Chalmers hands down his second budget on May 9, so expect to see key measures dribbled out over the course of the week.

U.S. stock indexes advanced on Friday after strong earnings updates from Exxon and Intel offset worries over Amazon’s slowdown warning, while economic data reinforced expectations that the Federal Reserve would hike interest rates next week.

The S&P 500 gained 34.71 points, or 0.83 per cent, to end at 4,170.06 points, while the Nasdaq Composite gained 84.35 points, or 0.70 per cent, to 12,226.58. The Dow Jones Industrial Average rose 275.36 points, or 0.81 per cent, to 34,101.52.

Australian share futures rose 54 points, or 0.73 per cent, to 7372.

The benchmark S&P/ASX200 index on Friday finished up 16.5 points, or 0.23 per cent, to 7,309.2, while the broader All Ordinaries climbed 18.8 points, or 0.25 per cent, to 7,501.0.