Overview

We have further front-loaded our rate track, and now see the cash rate target at 2.35% by November (was 2.1%) and peaking at 2.6% in February (previously mid 2023).

• Our view is that the RBA will continue to rapidly adjust rates towards neutral (around 2.5%), hiking by another 50bps in August and following up with 25bp in increases in September, November and February.
• The rapid increase in rates and higher prices faced by households will begin to moderate consumer demand and we now see below-trend GDP growth of 1.8% in 2023 and 2024.
• We see inflation peaking in both headline and trimmed-mean terms in Q4 at 7.2% and 5.4%, respectively. Inflation is then expected to ease in 2023 as growth slows globally and the impact of supply shocks begin to wane.
• High inflation in the near-term, however, risks a more material rise in inflation expectations and potentially the need to move more quickly or to a more restrictive stance should these expectations begin to feed back into the wage-bargaining process.

For further details, please see the NAB Monetary Policy Update – 12 July 2022pdf