Economic data released this week are likely to reinforce the Reserve Bank of Australia's dovish mood. Indeed, we learnt that underlying inflation is easing in earnest and is likely to undershoot the Bank's expectations. And while household spending is starting to pick up, it is no stronger than the RBA had projected. They key sticking point is that labour market indicators continue to point to an inordinately tight jobs market. As a result, we're sticking to our view that the Bank will begin its easing cycle only in May. However, the balance of risks is tilted towards an earlier start.
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