Although CPI data released this week showed a sharp slowdown in headline inflation, it’s clear that underlying price pressures remain strong. What’s more, yesterday’s retail sales data revealed an unexpectedly strong rebound in consumer demand. Given the tight labour market, as well as tailwinds from the emerging rebound in household wealth, upside risks to private consumption are growing. All told, we think the RBA will have to tighten further than most anticipate to rein in domestic demand.
ANZ Drop-In (4th July): Why the RBA’s war on inflation will end in recession. Join this special post-RBA briefing on what more the Bank will need to do to get price pressures under control, and the macro and market implications of any further tightening. Register here.
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