VIEW: Economists Split Over Whether RBA Will Pause Now

Here is a selection of views on the implications of Q2 CPI on the monetary policy outlook from The Australian and other sources.

• ANZ thinks that the drop in quarterly CPI rates may mean that current policy is high enough to reduce inflation. 52% of prices were above 3% down from 60% in Q1.
• CBA still expects one more hike in August.
• Nomura has pushed out its August hike to November as unemployment remains below the NAIRU, other central banks are still tightening and policy isn’t particularly restrictive. Easing should begin in May 2024 bringing rates to neutral by year end.
• ING expects that the softer Q2 CPI should mean the RBA pauses in August, but base effects may mean that there’s a September hike.
• Citi still expects hikes in August and September, with an increased risk Sept is delayed to November, as it doesn’t expect the RBA’s core inflation forecast to be “materially revised” whereas its wages forecast may be revised up.
• AMP believes that Q2 CPI should be enough for the RBA to be on hold in August but that it will be a close call. It now expects only one more 25bp hike.
• KPMG expects the RBA to pause in August, especially given the lags.
• VanEck is still forecasting the RBA to hike in August with the risk of further moves as inflation is still “stubbornly high”, the labour market is tight and there’s an upside risk to wages.
• Capital Economics is projecting at least another hike but sees the risk that the Q2 CPI data may be enough for the RBA to think it has done enough to contain inflation. But services inflation is likely to remain high due to elevated ULC and the tight labour market.
• Deloitte Access Economics believes the RBA is done tightening policy.