VIEW: NAB: Inflation Print Locks In A 50bp Hike For August

NAB note that “today’s inflation data printed broadly as expected, but importantly failed to provide the upside surprise that the market was fearing. Headline CPI came in at 1.8% Q/Q and 6.1% Y/Y (consensus 1.9/6.3) and the more closely watched core trimmed mean measure rose 1.5% Q/Q which was exactly in line with consensus. There was an upward revision to the past quarter helping push the core Y/Y rate to 4.9% Y/Y. Inflation clearly is running hot with trimmed mean inflation at its highest quarterly rate since 1990. This should keep the pressure on the RBA to continue to move quickly towards a more neutral setting of policy. NAB sees the RBA moving by 50bp in August and September. Within the details there is a clear broadening out of inflation into services amid the tight domestic labour market backdrop, pointing to the risk the RBA feels compelled to move policy more explicitly into restrictive territory as it seeks to chart a credible path back to 2-3% inflation. NAB sees the cash rate getting to 2.85% by November 2022.”