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Hedge Clippings | 01 May 2026 Are the RBA and Jim Chalmers caught between a rock and a hard place? The March inflation number looks ugly at first glance. Headline CPI jumped to 4.6%, up from 3.7% in February, with transport, housing and food doing much of the damage. But as ever, the headline only tells part of the story. The RBA's preferred measure of underlying inflation, the trimmed mean, held steady at 3.3%, suggesting the latest spike is being driven more by volatile fuel and energy prices than by a fresh broad-based inflation breakout. That is why Hedge Clippings' regular fund manager contributors, Renny Ellis from Arculus, and Nick Chaplin from Seed, both argue in this week's video that the RBA should hold fire at next Tuesday's Board meeting. Their view is that raising rates in response to an energy shock risks using the wrong tool on the wrong problem. Higher interest rates will not reopen the Strait of Hormuz, lower oil prices, or make global shipping routes safer. What they can do is add more pressure to households and businesses already dealing with higher costs and a slowing economy. It is worth noting that both Nick and Renny have been consistently on the money over the past 12 months, even when their views have sat at odds with the RBA's decisions. Their argument now is not that inflation should be ignored, but that the Board should distinguish between a genuine underlying inflation problem and a transitory supply shock. The danger, of course, lies in that word "transitory". Petrol and energy price spikes can be looked through if they are temporary. But that depends on the situation in the Middle East actually resolving - and quickly. Donald Trump originally suggested the conflict would be over in two or three weeks. That was more than two months ago. Currently, the situation still points to stalled diplomacy, disrupted energy flows and oil-price pressure thanks to the situation in the Strait of Hormuz, which potentially makes the inflation outlook much harder to dismiss as a short-term wobble. The RBA therefore faces an uncomfortable choice when they meet next week. Markets and most economists are leaning towards another 25 basis point increase, but the case for patience is stronger than the headline CPI number suggests. And with Jim Chalmers due to hand down the Federal Budget just one week later, the timing could hardly be more awkward. The RBA risks tightening before it has seen the fiscal response, while the Treasurer risks delivering a Budget that either fuels inflation concerns or deepens the slowdown. In short, the March CPI number gives the RBA a reason to worry, but not necessarily a reason to move. The smarter course may be to wait, watch the trimmed mean, and see whether the Budget helps or hinders the inflation fight. News | Insights
Manager Insights | East Coast Capital Management A decade of delivery: infrastructure's changing world | 4D Infrastructure March 2026 Performance News Glenmore Australian Equities Fund |
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