VIEW: NAB Stick With Existing View, But Note Growing Hawkish Risks

NAB note that “yesterday’s Board Minutes and RBA Deputy Governor Bullock’s Speech reveal that the Board is likely to continue to raise rates relatively rapidly in August, with an increase of at least 50bps likely. The June labour force data suggest the labour market was even tighter than the RBA foreshadowed and will require a further downward revision to unemployment forecasts in the August Statement on Monetary Policy. Next week’s CPI will likely reveal another very large lift in prices – something that the NAB Business Survey reveals is ongoing – also likely to require a further upgrade in inflation forecasts in August. Together they may prompt the RBA to consider a larger rate rise in August to return to a neutral setting slightly more quickly. NAB continues to expect further interest rate rises in the months ahead. Our current prediction is +50bps in August and +25bps in September, November, and February, but the risk is rising that the RBA sees the need to get interest rates to the broadly neutral 2.6% level we see early next year, earlier than we forecast.”