Resurgence in price pressures won’t last

The Melbourne Institute’s timely inflation gauge suggests that trimmed inflation is likely to overshoot the RBA’s expectations for Q3. Although the Board left rates on hold this week, we therefore still expect it to deliver another 25bp hike in November. That said, we doubt the Bank will tighten policy any further beyond that. Newly released PMI data point to a renewed slowdown in underlying price pressures in the months ahead. And although the Aussie dollar is coming under increasing downward pressure, we think there will be little pass-through from a weaker currency to goods inflation.