VIEW: Citi Now Look For No Change Next Week

Citi note that “the optics of a decline in the monthly Inflation Indicator from 8.4% in December to 7.4% in January and now 6.8% in February is likely to result in the RBA Board keeping the cash rate target at 3.60% next week. On this measure of inflation, price growth is moderating ahead of the RBA’s official forecast of 6.7% by June 2023. That said, there are enough measurement differences between the monthly indicator and quarterly official CPI series and signs of stickiness in core inflation for the Board to debate the merits of one final hike to 3.85% at the April Board meeting. We reconcile the difference by now forecasting the cash rate on hold at 3.60% but for guidance to keep open the option of a further tightening in monetary policy should subsequent data show ongoing stubborn inflation pressures or higher than expected wages growth from the still tight labour market.”