Too soon to call time on the RBA’s easing cycle

With economic sentiment improving, employment rebounding, and policymakers sounding increasingly hawkish, markets see only slim chances of further RBA rate cuts. However, we suspect the latest data overstate the pressure on capacity, given that firms’ output prices point to another leg down in underlying inflation in the months ahead. The upshot is that we still think the Bank will have scope to cut rates by another 50bp late next year.