Although the RBA is almost certain to slash its policy rate by 25bp at its meeting next Tuesday, it will probably remain cautious about commiting to further policy easing. After all, business surveys increasingly suggest that firms are raising their selling prices in response to higher material and wage costs. The latter, in particular, is likely to give the Board pause, given that the labour market has all but stopped loosening recently. Accordingly, we continue to believe that the RBA won't cut rates as far in the coming months as markets currently anticipate.
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