Steve Campbell: RBA likely to wait for April data before a move in May | Pendal Group
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Steve Campbell: RBA likely to wait for April data before a move in May

The RBA is getting close to pausing, but another rate rise is probable in May, says Pendal’s head of cash strategies STEVE CAMPBELL

THE Reserve Bank lifted the cash rate for a tenth consecutive meeting today – up 0.25 percentage points to 3.6%.

“When and how much further interest rates need to increase” would depend on “developments in the global economy, trends in household spending and the outlook for inflation and the labour market”, the RBA said.

The next Australian labour market data is due on March 16.

Unless the data is exceptionally strong, it’s unlikely to be the sole catalyst for the RBA to move again in April.

The RBA made reference to recent wage inflation data which suggests a lower risk of a wages-prices spiral.

Pendal's head of cash strategies, Steve Campbell
Pendal’s head of cash strategies, Steve Campbell

The key data release that will determine the next move is first-quarter inflation, due for release on April 26.

This will be the RBA’s own version of two-up played a day earlier on Anzac Day.

At this stage a rate hike looks less likely in April, but probable in May.

The RBA is getting close to pausing, particularly with the large amount of fixed rate mortgages rolling off from mid-year.

Household balance sheets have withstood policy tightening to date reasonably well, drawing on accumulated reserves and benefitting from a tight labour market.

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The risk to the system though is the tail.

Many households that took out a mortgage in 2020 and 2021 have little or no buffer to fall back on.

The key factor here is the labour market.

The unemployment rate will rise as the participation rate increases with an influx of foreign workers.

It’s when the hiring turns to firing that true stress in the market from policy tightening will emerge. Already for some it’s been a case of heads I win, tails you lose.


About Steve Campbell and Pendal’s Income and Fixed Interest team

Steve Campbell is Pendal’s head of cash strategies. With a background in cash and dealing, Steve brings more than 20 years of financial markets experience to our institutional managed cash portfolio.

Find out more about  Pendal’s cash funds:

Short Term Income Securities Fund

Pendal Stable Cash Plus Fund

Pendal’s Income and Fixed Interest boutique is one of the most experienced and well-regarded fixed income teams in Australia.

The team won Lonsec’s Active Fixed Income Fund of the Year award in 2021 and Zenith’s Australian Fixed Interest award in 2020.

Find out more about Pendal’s fixed interest strategies here


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