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ASX 200 down 1.75% mid session, all eyes on RBA's rate hike on Tuesday

Reserve Bank of Australia

CMC APAC Midday Report: RBA preview – To rise or not to rise?

Tuesday’s RBA meeting is a huge one for all Australian financial market participants. The meeting is well and truly considered “live” in wake of greater-than-expected Q1 22 CPI numbers of 5.1% y/y and 3.7% q/q (trimmed mean), the highest since March 2009. Higher dwelling construction costs and automatic fuel prices were the leading factors.

This raises the issue of whether the time is now for the RBA to raise the cash rate after continuous changes in it’s forward guidance over the last year and a half to indicate the timing of the first rate hike. However, the time is now and whatever decision they make will significantly impact the Australian market either way.

Bloomberg published an article earlier today starting that 13/21 economists expect a 15bp hike, with 5 seeing 40bps. 3 economists forecast no change as the RBA provided guidance for wages report data required per April’s board minutes.

There is also an impending election on May 18 which poses a political challenge whether the RBA should raise cash rates in the midst of a critical election with the risk of receiving backlash from all parties irrespective of their decision.

Questions to consider:
- Will the RBA raise rates on Tuesday & by how much?
- Will the RBA change their tune on their requirements and forgo the wages report as a result of a very high CPI print?
- Does the impending election have an influence on the RBA’s decision?
- If the RBA doesn’t move, then could you say that they didn’t move because of the election despite high CPI numbers? If the RBA does move, then did the election have an influence? Catch 22?

Today’s technical analysis – Pilbara Resources Ltd (PLS):
(Click here to enlarge chart)

Midday Update:
ASX 200: 7,341.70 (-1.75%)
AUDUSD: 0.7040 (-0.38%)
Qantas Ltd: 5.75 (+3%)
BTC: US$38,455

This is not investing advice and should be read as general information.


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