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RBA caught between a rock and a hard place

Although business confidence in Australia has plunged in the wake of the Iran war, indicators of underlying activity remain fairly resilient. With capacity pressures elevated and inflation risks intensifying, the RBA is likely to prioritise anchoring expectations through further tightening. However, should geopolitical risks persist and the domestic economy weaken more substantially, the Bank may reverse course on rate hikes sooner than we currently anticipate.

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