VIEW: NAB Now Expects Rates To Reach 2.35% By Year-End

NAB “have further front-loaded our rate track, and now see the cash rate target at 2.35% by November (was 2.10%) and peaking at 2.60% in February (previously mid 2023). Our view is that the RBA will continue to rapidly adjust rates towards neutral (around 2.50%), hiking by another 50bps in August and following up with 25bp in increases in September, November and February. The rapid increase in rates and higher prices faced by households will begin to moderate consumer demand and we now see below-trend GDP growth of 1.8% in 2023 and 2024. We see inflation peaking in both headline and trimmed-mean terms in Q4 at 7.2% and 5.4%, respectively. Inflation is then expected to ease in 2023 as growth slows globally and the impact of supply shocks begin to wane. High inflation in the near-term, however, risks a more material rise in inflation expectations and potentially the need to move more quickly or to a more restrictive stance should these expectations begin to feed back into the wage-bargaining process.”