May 21, 2018
NAB change in cash rate call: May 2018
First 25bp increase now expected mid-2019.
- We have delayed the timing of when we expect the RBA to start a gradual rate hiking cycle.
- The change reflects the fact there is no sign yet of stronger wages growth and unemployment has been stuck around 5.5% for the best part of a year.
- While still very data dependent we now have the start of the rate hiking cycle in mid-2019
- We still expect the economy to strengthen, leading to a declining unemployment rate. This should eventually translate into stronger wages growth and give the RBA confidence that inflation will track back to its 2.5% target. However, we acknowledge there is considerable uncertainty around the timing at which wages growth will strengthen, and the time of the RBA’s next move will remain highly data dependent.
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