Australian Economic Comment: Q2 CPI well < expected; UBS delay RBA hike to Nov-26; & risk falling home prices stops hikes

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Australian Economic Comment: Q2 CPI well < expected; UBS delay RBA hike to Nov-26; & risk falling home prices stops hikes

, the ~equal fastest since Q2-24. Compared with

the RBA's forecast in their May-26 SMP, this implies trimmed mean CPI in Q3-26 will be

close to their implied profile of ~3.6% y/y. Hence, at the RBA's upcoming meeting in

Aug-26, their SMP forecast for trimmed mean CPI for Q4-26 of 3.5% y/y may be

lowered by only a ~tick. Indeed, this would 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