Back in February, NAB said it expected just one rate rise in 2018. It said its previous forecast of an August increase had been pushed out to “late 2018”, based on the data available at that time. Given most RBA rate changes have been in either February, May, August or November, “late 2018” was likely to have meant November.
Now, NAB expects no rate increases in 2018 at all. It was the last of the major banks to change its view to the “no rate increases in 2018” scenario, Commonwealth Bank having done so in the first week of this month.
NAB has joined Westpac, ANZ and Commonwealth, all of whom expect the first official rate increase by the RBA in 2019. Commonwealth expects a rate rise in February, while Westpac and ANZ expect the first increase to be more in the middle of the year.
The triggers for NAB’s change came just over a week ago after the release of March quarter wage price index and April Labour Force figures.
NAB’s view of economic growth, employment growth and wages has not changed. “In particular, our view has been that economic growth will strengthen over the coming year and that, with the pace of jobs growth already solid, this would lead to a declining unemployment rate and as a result upwards pressure on wages growth and inflation.”
After last week’s reports, NAB came to the conclusion a rate rise in November “is too early and we now expect the RBA to be on hold through the rest of this year.” NAB cannot see the RBA moving while wages grow at 2% or thereabouts. “Quite reasonably, the RBA does not see 2% wages growth as consistent with 2.5% inflation over time and wants to see some pick-up in wages before lifting rates.”