We expect the Reserve Bank of Australia to leave rates unchanged at its meeting next week. Although underlying inflation remains uncomfortably high, it is unlikely to meet the threshold for a resumption of policy tightening. We suspect that the Bank will be content to wait for below-trend growth and labour market softness to dampen capacity pressures. That said, the path back to the RBA’s 2-3% inflation target is likely to be bumpy and we don’t expect rate cuts to come on the agenda before early next year.
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