While the exchange rate has only played a minor role in the surge in “core” goods inflation to a record-high, the further depreciation of the Australian dollar over the past month will tilt the balance towards another 50bp rate hike by the RBA next month. However, the September manufacturing PMI suggests that inflation has reached a turning point as supply shortages ease and firms signal smaller increases in output prices. The upshot is that the Bank should be able to slow the pace of tightening from November.
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