May meeting, RBA set for third straight hike as Hormuz closure drives inflation surge

A Reuters poll shows 30 of 33 economists expect the RBA to raise its cash rate by 25bp to 4.35% at the May 5 meeting — the third straight hike — with a growing minority now pricing a terminal rate of 4.60%+ by year-end. Australia’s annual CPI rose to 4.1% (core 3.5%), and the Strait of Hormuz closure has kept crude above $100/barrel, briefly topping $126, amplifying inflation upside. Markets have rapidly repriced higher terminal-rate risk, narrowing the fraction expecting rates to remain at 4.35% through year-end. The RBA’s 2025 experience of inflation rebounding after early cuts has increased the bar for easing, making policy guidance on May 5 critical for Australian rates markets and the AUD. Overall, the article signals tighter-for-longer RBA expectations and likely AUD strength if the bank signals further tightening or a higher terminal rate.