VIEW: RBC Now Look For Pause In April

In lieu of the monthly CPI data RBC write “Feb CPI was the last key piece of domestic data ahead of next Tuesday’s April board meeting. On balance, we view the domestic data over the last month as softer and coupled with the ongoing uncertainty from global banking developments and an RBA already leaning towards a pause in March, we push back our final RBA hike from April to May. Accordingly, we retain a terminal forecast of 3.85% and continue to think the risk is skewed to the upside in what may be a more drawn-out end of policy cycle.”

• “The still challenging inflation outlook suggests that policy needs to move more restrictive. The decision at next Tuesday’s board meeting is likely to be finely balanced and close.”
• “While the translate through to Australia from global banking developments looks modest, uncertainty remains high. And, the RBA has signaled clearly a preference to pause and is likely to be looking at data and developments through that lens.”
• “Its communication continues to err dovish and hint at a tolerance for higher inflation. The window to hike further appears small ahead of the step up in fixed rate mortgage expiry from mid-year but the RBA may be forced to resume tightening if inflation proves sticky.”
• “We expect the RBA to retain an explicit tightening bias next week.”