VIEW: No Change In CBA’s View Post-CPI

CBA note that “Governor Philip Lowe recently stated that the RBA now expects inflation to peak at ~7% by the end of the year. This was an upward revision relative to the RBA’s inflation forecasts in the May Statement of Monetary Policy (SMP) ‑ headline inflation was forecast to peak at 5.9% in Q422 in the May SMP.”

• “It unusual for the RBA to revise their inflation forecasts between quarterly official forecast updates. But this upward revision has in large part been the basis for the RBA hiking rates in 50bp increments over the past two months rather than moving in ‘business as usual’ 25bp steps as they did in May.”
• “Whilst we do not have an official updated inflation profile from the RBA, based on Governor Lowe’s recent comments on inflation we believe that the RBA’s updated implied inflation forecast for headline CPI in Q222 would be broadly in line with today’s outcome (note that the RBA has not commented on any updates to their core inflation forecasts, albeit they will also be upwardly revised in the August SMP).”
• “We retain our call that the RBA will lift the cash rate by 50bp at the August Board meeting. We also retain our central scenario that the terminal cash rate will be 2.6% and we expect that to be reached by late 2022.”