Restrictive policy will bring inflation to heel

With Australia's inflation problem proving stubborn, we expect the RBA to hike again next week. Core market services inflation has accelerated, while rising import costs for electronics threaten to interrupt the recent decline in core goods inflation. But tighter monetary policy is already weighing on new dwellings inflation, and our forecast for a sharp slowdown in growth next year suggests disinflation will eventually broaden out. We therefore expect next week's hike to be the last of the cycle.