Weekly Market Update | 17 May 2023

The economy and markets have been quite eventful in recent weeks, with surprising developments from the Reserve Bank of Australia (RBA) meeting and the ongoing analysis of the Federal Budget. Economists are also eagerly examining the influx of economic data.

Looking ahead, we anticipate the release of the minutes from the May Board meeting, as well as data pertaining to wages and the labor market. The unexpected 25-basis-point increase in the cash rate by the RBA has piqued curiosity, and the meeting minutes will provide valuable insights into the factors driving this decision. Given the importance of wages growth and the labor market in relation to inflation, it will be noteworthy to observe any potential rise in wages growth. However, if the increase remains modest, it will indicate that wage pressures are under control.

While the labor market remains tight, there are signs of improvement as labor supply gradually resumes. The pace at which labor supply expands will be of particular interest to the RBA. Currently, it is widely expected that the cash rate will remain unchanged for the remainder of the year. Nevertheless, unforeseen data outcomes could necessitate additional rate hikes.

In the United States, consumer sentiment recently reached its lowest level since November. The decline can be attributed to concerns about the economic outlook exacerbated by political negotiations surrounding the government’s borrowing limit.


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