Key takeaways:

• Numerous economists quickly raised their RBA rate forecasts for the coming months in the immediate aftermath of the Fair Work Commission decision

Following last week above-forecast inflation, and the largest rise in the award wages since 2009, another RBA hike is suddenly a possibility when the Board meets Tuesday.

Economic Calendar and News

All eyes will be on the nation central bank this week as the RBA convenes for its June meeting to weigh up the next move in its battle against inflation.Following last week decision by the Fair Work Commission to lift the pay of 2.4 million workers on award agreements by 5.75%, a growing number of economists now expect the RBA to increase the official cash rate beyond 4% as the inflation challenge could become more tricky amid the higher risk of a wage-price spiral.

In fact, within an hour of last week wages decision, financial markets already began to reprice their forecasts for a 25 basis point hike at Tuesday Board meeting, albeit the consensus view is that if a rate hike does not pass this week, it will likely follow at the next meeting. 

Furthermore, a number of analysts hiked their projections for the terminal interest rate, with some estimates now suggesting as many as three more rate hikes, or a peak benchmark of 4.6%, could be on the cards by the final quarter of the year.

Another factor not helping the cause last week was the monthly consumer price index, which at 6.8% came in well above forecasts of 6.4%, and higher than the 6.3% reading the month prior.

One point that could prompt a wait-and-see approach from the RBA is the release of gross domestic product (GDP) data on Wednesday, a day after the central bank meeting. 

The reading is expected to offer greater insights on labour productivity and unit labour cost growth, which have been central concerns for the RBA. In particular, the RBA is looking to see unit labour cost growth drop below 3% in order to bring down inflation, whereas currently it is 7.1%.

Meanwhile, on a consensus basis, GDP is tipped to have grown 0.3% in the first quarter of the year. Some observers have indicated the downside risk of a contraction in economic activity due to a notable level of net exports.

Stocks on watch

The RBA monetary policy decision is expected to have an impact on ASX-listed banks, with lenders directly leveraged to the prospect of another rate hike. While banks have derived a net benefit from rising interest rates in the past, that was typically during periods where rates rise slowly, and where competition was more subdued.

On the other hand, majors ANZ (ASX: ANZ), Westpac (ASX: WBC), NAB (ASX: NAB), and Commonwealth Bank (ASX: CBA), as well as regionals like Bank of Queensland (ASX: BOQ) and Bendigo Bank (ASX: BEN) have been competing fiercely in the home loan market and for deposits. 

That has led to margin pressure over recent months, despite the upside of higher rates. It has even prompted some of the banks to wind back their competitive efforts, which reportedly saw some banks writing loans at below cost. 

A number of retailers are expected to be hit by last week rise in award wages, at the same time forecasts suggest retailers face a potential slowdown in sales growth as challenging macro conditions emerge.

Many majors align their pay rises with the Fair Work Commission decision, or respond to scenarios where the minimum award rate would exceed current agreements. In total, an estimated 20.5% of employees will be affected by the award rate increase of 5.75%, while approximately 0.7% of employees will be subject to the 8.6% hike. 

Some of the retailers that could feel the squeeze most include Harvey Norman (ASX: HVN), Premier Investments (ASX: PMV), JB Hi-Fi (ASX: JBH), Wesfarmers (ASX: WES), and Super Retail Group (ASX: SUL), among others. Naturally, there will also be an impact on supermarkets Woolworths (ASX: WOW) and Coles (ASX: COL), where labour costs are significantly high and margins are low, but their goods are categorised as essentials.After hitting an all-time high, Apple (NASDAQ: AAPL) enters the new trading week full of momentum. Kicking off the week, the consumer electronics giant will host its worldwide developers conference. The company is expected to release a host of new products, including new Macs, operating systems, and even a mixed reality headset. 

The headset device, dubbed Reality Pro, is expected to be powered by the tech giant M2 chips, with optional configuration between augmented and virtual reality tech. Apple management will also likely talk about the role that AI might play in the company ecosystem, which follows a frenzy of interest of late.

Video game retailer and meme stock GameStop (NYSE: GME) will report earnings this week. As the company management attempts to steer the business back on track, and in the wake of a profitable quarter last time around, Wall Street is predicting sales to decline for a fourth straight quarter. With that said, losses are expected to narrow versus a year ago amid forecast improvements in hardware sales and growth across small collectibles.SelfWealth Ltd ABN 52 154 324 428 (Selfwealth) (AFSL 421789). The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser and/or accountant. Taxation, legal and other matters referred to on this website are of a general nature only and should not be relied upon in place of appropriate professional advice.