VIEW: Goldman Now See 50bp In Aug, No Change To Year End Level Call

Goldman Sachs note that “compositionally, inflation remained fairly broad based across the basket, with ongoing sharp rises in food, transport and housing costs. Underlying measures of inflation remained elevated but were broadly in line with expectations, with the trimmed mean CPI increasing 1.46% Q/Q and the weighted median CPI increasing 1.41% Q/Q.”

• “Looking forward, while inflation clearly remains elevated, the downside miss to headline CPI inflation reduces the urgency for the RBA to accelerate the pace of rate hikes in our view. As a result, we now expect the RBA to hike by +50bp to 1.85% in August (previously +75bp to 2.10%), although we continue to view it as a close call.”
• “Further ahead, we continue to expect the RBA to take rates to 3.35% by end 2022 alongside a further acceleration of inflation over H222. Beyond the August meeting, we expect the RBA to achieve this by hiking +50bp in September, +50bp in October (prev. +25bp) and +25bp in both November and December.”