At first glance, data released this week should give the RBA greater confidence that it has brought price pressures under control. Both headline and underlying inflation remained within the Bank's 2-3% target range in January, aided by a sharp slowdown in shelter inflation. Additionally, the economy seems to have remained in a soft patch last quarter, with private investment falling outright. However, the picture is not as clear-cut as it seems. The monthly CPI print may be understating inflationary pressures, given that prices for most services were not surveyed last month. And while weak business investment is crimping demand, it is also hindering the economy's supply capacity.
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