NAB change in cash rate call: May 2018

First 25bp increase now expected mid-2019.

By

  • 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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