VIEW: NAB Reaffirms RBA Call

NAB notes that “with an upside surprise to inflation, but the RBA continuing to raise interest rates by 25bps, it seems likely that there is a very high hurdle to return to a larger 50bps increment for rate rises. The Board continues to watch wages and price-setting behaviour closely, with a rise in wages above 4% y/y, were it to occur, likely to be problematic for the RBA, though this could be addressed by extending the string of 25bps increases.”

• “The Governor will likely provide some additional colour on today’s decision at 7.20PM tonight when he speaks in Hobart. Key will be whether the Board discussed 0, 25bps or 50bps moves, as the market will assume that 25bps is the default increment going forward. The next significant phase will be when the RBA decides to pause interest rates, to further monitor the impact of this year’s rate rises. NAB expects the impact of rate rises to be felt more significantly late this year/in the first half of next year, meaning a pause during Q1 or Q2 is likely.”
• “NAB forecasts further 25bps increases in December, February, and March, to take the cash rate to 3.60%.”