### POV: CPI WON'T CHANGE RBA VIEW, WHICH.......>

RBA: ### POV: CPI WON'T CHANGE RBA VIEW, WHICH COULD BE A LITTLE OVER-OPTIMISTIC

Australia's Q2 CPI release will do little to change the course of the RBA's

MonPol, with mkts pricing a 20% chance of a hike by the end of May '19 (a touch

lower than levels seen Tues). It is our understanding that the RBA remains

unfazed by the continued trend of low inflation, as it expects above-trend

growth to lead to acceleration in wages, which may be a little optimistic.

- The RBA noted that the vacancy rate "had reached its highest level as a share

of the labour force since the late 1970s, when the series commenced" in the

minutes of its most recent MonPol decision, although the measure has eased a

tad, while the ANZ jobs ads metric is little less conclusive suggesting that

labour market based inflation may remain a little more muted than the RBA

expects, especially with the underemployment rate remaining stubbornly elevated,

albeit off of the 2017 cycle peak. It is also worth noting that NAB's latest

Business Survey pointed to a continuation of weak price pressures in the econ.

- RISKS: Labour mkt growth/elevated vacancies push wages up quicker than

expected.