VIEW: NAB: More Tightening Needed, But Removes Pre-Commitment And Is Data Dependent

NAB note that “the changes to the Statement raises the possibility that the RBA could contemplate pausing in April or May, dependent on the data, even while maintaining a tightening bias. Given inflation pressures, we still think the RBA will hike by 25bps in April and May, taking the cash rate to 4.10%. But today's Statement does raise the risk of the RBA pausing at 3.85%. The key data point ahead of the April RBA meeting is next week’s Labour Force (16 March) where a rebound in employment would likely see the RBA hike again in April. The RBA, like us, concluded the weakness seen in employment last month was due to changing seasonal patterns rather than signalling weakness. The NAB Business Survey (14 March), Retail Sales (28 March) and the Monthly CPI Indicator (29 March) are also ahead of the April Meeting.”

• “Looking to May Meeting, the key data input is the Q1 CPI on 26 April. Although the RBA took some signal from the most recent monthly CPI indicator that “inflation has peaked in Australia”, services inflation remains high and unfortunately we will have to wait for the Q1 CPI to have good read on services inflation; the February Monthly CPI Indicator on 29 March though does contain better coverage of services inflation than the January release, including restaurant meals and auto repairs among others, as well as rents. The next available wages print to make an assessment of underlying wages pressure is not until 17 May, in time for the June RBA meeting.”