VIEWS: Will May CPI Data Drive A July Pause?

Here is a selection of views on today’s lower-than-expected CPI data and the RBA.

• ANZ noted that May core inflation was “less encouraging” than the decline in headline. "We still expect the RBA to raise the cash rate in July and August, but given that the last two decisions were described by the RBA Board as “finely balanced”, there is a chance the monthly CPI data could shift the RBA to a pause," said senior economist Timbrell.
• AMP Capital’s senior economist Mousina believes "today’s inflation data gives the RBA room to pause hiking rates at its meeting next Tuesday but the high level of inflation and the RBA’s concern about increasing wages growth will keep the RBA hawkish and means that another 1-2 rate hikes are still likely over coming months."
• Rabobank expects “the next (and final) rate hike to occur at the August RBA board meeting. Recent labour market data justifies a higher policy rate, but the economy is largely unfolding in line with RBA forecasts. The soft monthly CPI figure for May increases our comfort that the RBA is close to the end of the hiking cycle."
• Betashares chief economist Bassanese said "the RBA likely has at least one shot left in the locker but could wait until August – after the quarterly CPI release – to use it. It will be wary, however, that a pause in July could encourage a further rebound in house prices and consumer spending."
  - The Australian