Morning Expresso – Australasia

Research evidence excerpt

Morning Expresso – Australasia

d still be

above the RBA's forecast made earlier in Feb-26 – i.e. before the Middle East conflict – which previously

expected 3.2% y/y. Furthermore, the RBA is still likely to forecast trimmed mean CPI to remain above

their inflation target band of 2% y/y to 3% y/y until 2027, & will still project for TM inflation to also not

return to their 'proper target' of the mid-point of 2½% y/y until mid-28; i.e. still another 2 years from

now.

RBA Governor speech implied delayed rate hike, if inflation not coming down

RBA Governor Bullock's speech yesterday, overall, was on the hawkish side. Bullock concluded "The

Board is prepared to act as required to achieve its mandate, including by increasing the cash rate further

if needed." However, on the dovish side, during Q&A, Bullock noted housing, particularly prices, has

been weaker than expected. I asked 'if the CPI trimmed mean in Q2-26 printed ~in line with the RBA’s

forecast of ~3.8% y/y, would a rate hike in August be live?' The market interpreted Bullock's response

as dovish. However, Bullock still initially said "Inflation is still too high"… and there's "going to be cost

increases flowing through". That said, the market reaction put more weight on her subsequent

comment that the "question is going to be what happens after that... [Does inflation] continue to

increase or does it start to come off?" Bullock later added "If it looks like that inflation is not coming

down, then I think the board have some difficult decisions to make in terms of raising interest rates."

UBS interpretation is this implied the RBA could delay a rate hike to Nov-26; i.e. after CPI for Q3-26.

That view also followed the RBA's meeting Jun-26, when Bullock in the press conference noted: "I can't