VIEW: TD Securities Now Look For 75bp Step In August

TD Securities note that “the Governor may have preferred returning monetary policy towards 'business as usual' but developments are anything but usual. Stronger than expected domestic data outcomes and more hawkish offshore central bank actions mean the RBA debate shifts from 25 or 50 to 50 or 75 bps hikes. We now expect the RBA to hike 75bps at next month's meeting (on labour market data, NAB business survey wage dynamics, upside risks to RBA inflation projections, a struggling AUD and more aggressive offshore central bank moves) and not 50bps as per our prior call. We make no changes to hikes at subsequent meetings - Sep +50bps and 25bps hikes in Oct, Nov, Dec. Our year-end 2022 and terminal rate forecast is now 3.35%.”