The guys over at NAB have assimilated the inflation data and have this to say:
Because the CPI was so low, with underlying inflation over the past two
quarters running at an annualised pace of about 2%, right at the bottom of
the target band, the RBA will need to cut its inflation forecasts and this
will provide room for a cumulative 50bps of easing ahead.
Since this is not an emergency – the RBA only moves by 50bps or more in an
emergency – we expect them to cut by 25bps in May and then follow up with
another 25bps in June. Our previous forecasts had only one 25bps cut in
May.
Moreover, with domestically generated inflation high, recording a 1% rise
in the quarter (non-tradeables measure) and 3.6% over the year to the March
quarter, the RBA will be cautious ahead.
The June (and any subsequent cuts which might occur) are dependent on data
and events. However, because we are expecting a significant fiscal
tightening in the Budget, a mild rise in unemployment ahead and soft
business confidence, we now expect the RBA to follow up a May cut with
another cut in June.
