NAB change in cash rate call: February 2018

NAB economics changes cash rate view to one 25bp increase in late 2018.

By

  • Weak wages growth and slow progress reducing unemployment means it is now less likely that the RBA will raise rates twice in 2018 (our previous forecast).
  • We now see the RBA raising rates only once in late 2018 – with November 2018 as the most likely start date for a gradual RBA rate hiking cycle.
  • By late 2018 growth should be near 3% and the unemployment rate approaching 5%. That, together with increasing tightness in employers’ ability to find suitable labour, may finally see private sector wages start to moderately edge up.
  • Inflation by that time should also be approaching the bottom of the 2-3% target range.
  • That said, much will still depend on the data flow – it is not impossible that the RBA stays on hold for all of 2018 and raises rates in early 2019.

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