VIEW: NAB Sees Q3 CPI Resulting In RBA Hike

NAB is expecting Q3 headline CPI to come in in line with consensus at 1.1% q/q but for core to print higher at 1.1%. It is forecasting September to rise to 5.4% from 5.2%. This outcome it believes would result in an upward revision to the RBA’s CPI forecasts and in response it would hike rates 25bp in November.

• NAB expects “market services inflation excluding travel and telco, watched by the RBA as a measure of domestically sensitive inflation, to reach a fresh quarterly and annual high around 7% y/y.” In Q2 it rose 6.8% y/y.
• “Progress on disinflation to date has come almost exclusively from slower price rises for non-food goods and newly constructed houses. Those were the low-hanging fruit of the disinflation process, and we expect progress to slow from here,” NAB observes.
• “Headline drivers are a sharp lift in fuel prices (+7.4% q/q), offset by declining fruit and veg prices and an estimated, though uncertain, 15% decline in childcare prices on the back of higher government subsidies.”