Overview

On the back of today’s very strong Q1 CPI data, NAB now expects the RBA will raise the cash rate target by 15bps at next week’s May Board meeting. Further 25bp increases in June, July, August, and November will take the cash rate target to 1.25% by year’s end.

• The headline CPI read of 2.1% q/q (5.1% y/y) and trimmed-mean of 1.4% q/q (3.7% y/y) exceeded NAB’s expectations and was well above the RBA’s most recent February forecasts. Temporary factors continue to play a role in stronger inflation outcomes, but underlying inflation is likely to remain elevated into Q2 alongside further falls in the unemployment rate and strengthening wages growth.
• We continue to see three further cash rate increases in 2023 and two in 2024, taking the target to around 2.50%. We expect the RBA to also confirm that it will not reinvest maturing bonds at the May meeting.

For further details, please see the NAB Monetary Policy Update – 27 April 2022