Whether you're actively buying S&P/ASX 200 Index (ASX: XJO) shares or simply considering it, you'll probably like the latest inflation forecast from National Australia Bank Ltd (ASX: NAB).
On Wednesday, at 11:30am AEST, the Australian Bureau of Statistics (ABS) will release the monthly consumer price index (CPI) data covering the month of May.
Last month the ABS reported that, over the year to April, the monthly headline CPI indicator had increased by 3.6%. If you take out volatile items and holiday travel, underlying inflation increased by 4.1%, in line with the inflation data in December.
Those sticky inflation figures led to the Reserve Bank of Australia holding the official interest rate at the current 4.35% at its meeting last Tuesday.
In its battle to tame soaring inflation, which reached almost 8% at the end of 2022, the RBA has hiked interest rates 13 times since May 2022. It's hard to believe today, but back then the official Aussie cash rate stood at a rock bottom 0.10% following years of 'stubbornly absent' inflation.
Should the inflation data surprise to the upside this Wednesday, ASX 200 shares could come under pressure amid concerns that the RBA's next move in August may be to hike rates once more.
On that front, however, NAB has a fairly positive forecast.
NAB's inflation forecast could see ASX 200 shares rally
Indeed, NAB's inflation forecast could see ASX shares rally into the end of the week.
According to NAB (courtesy of The Australian Financial Review), "The May CPI indicator is not the full CPI and should be looked at with a view to implications for the Q2 CPI on July 31, ahead of the RBA's August meeting and forecast update."
With that caveat in mind, NAB said:
This month, being the second month of the quarter, contains better coverage of a range of services categories that will help guide the RBA assessment of domestic inflation pressure and firm up Q2 forecasts.
We pencil in 3.6 per cent year-over-year, versus consensus for 3.8, from 3.6 per cent in April. The below consensus pick looks to be due to a large expected fall in volatile travel prices in the month. Prices fall seasonally in May, but the magnitude of the measured decline is highly uncertain.
For the ex-volatiles and travel number, we pencil in 3.9 per cent from 4.1 per cent, though the risk sits with a 4.0 per cent.
While some ASX shares have come under pressure amid hot-running inflation and rising rates, that's not true for ASX 200 bank stocks.
NAB shares, for example, are up a whopping 42% over the past 12 months.
