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CPI (Jul.) & Retail Sales (Jun.)

The unexpected decline in core inflation in July, to 1.7% from 1.8% in June, probably marks a turning point for the second half of this year. With labour market conditions likely to become even more challenging due to the prospect of slow economic growth, disinflationary pressures will intensify. Overall, we still think that policy interest rates are likely to remain low for longer than the consensus view.

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