📝3.6% Likely to Be RBA Cash Rate Peak, Upside Risks Remain: NAB

Yesterday’s post meeting statement continued to emphasise the RBA remains “resolute” in returning inflation to target and will continue “to do what is necessary to achieve that”. However, the Board also remains conscious of the cumulative 350bp increase in the cash rate over the past year and the lags in the transmission of monetary policy, justifying a pause in the month to “provide additional time to assess the impact of the increase in interest rates to date and the economic outlook” while aiming for a “soft landing”

In our view waiting three months will see the RBA (which to date has had more optimistic forecasts than us) overrun by slowing activity data, a turning point in the unemployment rate and the ongoing moderation in inflation.

In our view, stopping at 3.6% leaves some upside risk in the near term ahead of the Q1 CPI (late April) and Q1 WPI (late May). The upcoming release of the Q1 quarterly CPI in late April will likely confirm the peak in yearended inflation while also providing greater detail at the component level and an update on the underlying measures of inflation. - NAB