NAB note that they see no reason to alter their “Monetary Policy forecasts on the basis of today’s Minutes. The Minutes overall leave the impression of the RBA being happy to move in 25bp increments and being conscious of both the upside risks to inflation and the uncertainty in “how households would respond to rising interest rates, given the high level of household debt and the significant increases in financial buffers over the preceding couple of years”. The next major event on the Monetary Policy calendar is the WPI on Wednesday 17 May (tomorrow). We expect a 0.7% Q/Q print, which is also what the RBA has in its May SoMP forecasts. Such a print would be supportive of a 25bp move in June rather than a larger rise, while a lower print would still likely see the RBA move by 25bp given the signals coming from its liaison program and from business surveys. A sharp upward surprise could see the RBA contemplate a larger hike, though we see that as more likely in August following what we expect to be another large CPI reading for Q2. NAB continues to see the RBA raising rates to 1.35% by the end of 2022 and then to 2.60% by the end of 2024. This is still well below market pricing.”
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