May weekend with central banks. We are waiting for interest rate decisions

On Tuesday Reserve Bank of Australia (RBA) will begin a series of May meetings of leading central banks, which will be the main event of the first week of May in the financial markets.

Inflation in Australia is falling

In March, CPI inflation in Australia fell to 6,3 percent. from 6,8 percent YoY, and in the entire first quarter of 2023 it decreased to 7%. from 7,8 percent in the last quarter of 2022. And although inflationary pressure will decrease in the coming months, inflation remains significantly above the central bank's inflation target. Therefore, at the moment there is no question of ending the cycle of interest rate increases in Australia. However, interest rates will not be increased at the next meeting.

The market is forecasting that the Reserve Bank of Australia (RBA) will leave the cost of money unchanged on Tuesday, May 2, leaving Australia's key rate at 3,60%. This scenario is indicated by 26 out of 34 economists polled by Reuters. Eight economists are of the opposite opinion, forecasting an increase of 8 basis points (bps). In the opinion of the majority, however, this will have to wait until the June meeting.

The results of the RBA meeting will be one of the two main factors that will affect the AUD/USD pair in the first week of May. The second will be the results of ... the US Federal Reserve (Fed).

AUD/USD daily chart. Source: Tickmill

Fed rate decision on May 3

Decisions Fed on interest rates, investors will know on Wednesday, May 3. The next day, however, he will decide about the rates European Central Bank (ECB). In both cases, increases of 25 basis points are expected. According to forecasts, the US Fed will raise the fluctuation range for the federal funds rate to 5,00-5,25 percent. from 4,75-5,00 percent. now, where the cycle of increases should end. The ECB, on the other hand, will raise the deposit rate to 3,25 percent and the refinance rate to 3,75 percent, which will probably be the penultimate increase in the cycle.

Next week, the Bank of Norway and the Bank of the Czech Republic will decide on interest rates. The latter will not raise his feet. These from June 2022 remain at the level of 7%. the main rate), and perhaps already in autumn the Czech bank will start lowering them.