ANZ now expecting rate hike in May, shifts from hold
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The news: ANZ is now expecting the Reserve Bank of Australia to hike the cash rate by 25 basis points to 4.1% in May following a series of inflation shocks and less deceleration on the trimmed mean in January than expected by the bank.
The context: Prior to the release of higher-than-expected consumer price index data on Wednesday, ANZ had been expecting the RBA to keep the cash rate on hold for the remainder of the year.
However, ANZ chief economist Adam Boyton said: “the case for May is not clear cut as market pricing would suggest”. He noted that “the three-month annualised month-on-month rate of trimmed mean inflation is trending lower” and household spending growth “does look to be slowing”.
“Indeed, at the time of the February RBA Board meeting yearly growth in this series was 6.3% (yearly growth to November 2025). With the decline in December and some revisions that y/y growth rate is now 5.0%”.
He also flagged that the RBA has made it clear there it is “not on a predetermined parth of policy”.
On Wednesday evening, Bullock said “now we’re in a situation where the labour market, we think, is a little bit tight, inflation is a bit elevated, I don’t think it’s taking off again”.
The source: ANZ research
