VIEW: NAB Retains November Easing Call, Q2 CPI Key For Outlook

Q1 CPI rose 1.0% q/q and 3.6% y/y and the trimmed mean rose 1.0% and 4.0%, above NAB’s forecast of +0.8% and 0.9% q/q respectively. It sees the higher-than-expected result not forcing the RBA to change their outlook but it is likely to test their confidence of achieving target by end 2025. NAB is maintaining its view that the first rate cut will be in November, but resilience in the labour market and little “good news” in Q1 CPI put a “premium on next quarter’s CPI” as the “RBA seeks to develop confidence in the inflation track”.

• “NAB’s view remains for ongoing but uneven and gradual progress on inflation while policy remains moderately restrictive. Below trend growth is expected to continue to feed through to some cooling in the still tight labour market and reduce excess demand. At the same time, some of echoes of earlier cost pressures are still finding their way through to end prices …”
• “Recent data means the RBA will need to revise higher their near-term inflation outlook and lower their near-term unemployment outlook at the May meeting. Even if outcomes were broadly in line with their forecasts, it would have taken some time for the RBA to be comfortable inflation trends are consistent with inflation around the mid-point of the target band by mid 2026.”
• “The paring of market pricing for cuts over the past 3 months means forecasts the upcoming May SoMP will be conditioned on tighter‑for‑longer policy, and while the recent data flow will rightly test their confidence, the RBA needn’t abandon their forecast for some continued progress in the outlook.”