VIEW: NAB Sees “Glimmers Of Hope” Services Inflation Easing

Australia’s CPI in February was stable at 3.4% y/y but services components were “generally elevated” but NAB saw “glimmers of hope” in some areas such as meals & takeaways. After looking at the report’s details, NAB has retained its Q1 trimmed mean forecast of 0.9% q/q and 3.8% y/y but with the risks skewed to the downside. Headline is currently forecast to rise 0.8% q/q and 3.4% y/y.

• “NAB’s view remains for ongoing gradual progress on inflation as below trend growth feeds through into some further cooling in labour market tightness and reduction in excess demand, and some of the echoes of earlier cost pressures still finding their way through to inflation outcomes fade.”
• “It will take some time for the RBA to be comfortable inflation trends are consistent with their outlook for inflation to be around the mid-point of the target band by mid 2026, and we continue to see the RBA on hold until late this year, pencilling in a first cash rate cut in November.”
• “More updates on a range of goods prices point to a much less material detraction from Q1 CPI compared to Q4. On the services side, while inflation remains elevated, there are some glimmers of good news. We continue to expect that services inflation can moderate further even amid more persistence in base wages growth, though it will be a gradual process.”