VIEW: NAB Stick To Core View Post-CPI

In lieu of the Q1 CPI data NAB note that “The data provides room for optimism and is a heartening start to the disinflation challenge. It also confirms the RBA’s hopes of inflation under shooting their February outlook, but inflation remains much too high and much of the initial progress on quarterly trimmed mean prints is the result of some low-hanging fruit. While inflation is past its peak and there is some welcome relief on goods and construction price increases, underlying measures remain high and market services inflation overall has shown only a little deceleration.”

• “The RBA expects labour cost sensitive inflation pressures to slow as output per hour worked recovers and unit labour cost pressures ease, even amid a broader ongoing lift in base wages growth. It will take some time for the data to confirm or challenge that outlook. Sticky domestic inflation or a more material lift in wages growth remains a risk to the RBA’s path back to 2-3%.”
• “NAB’s central view is that the cash rate at 3.6% will be the peak and the RBA will leave the cash rate on hold for an extended period into 2024. Today’s data don’t push the RBA in May and we stick with our forecast for the RBA to be on hold at the May meeting. That said, the decision will not turn mechanically on this data, and the risk the RBA moves higher in the near term remains.”