The head of the Reserve Bank of Australia has hinted that the central bank will take its foot off the accelerator and lift interest rates more gradually.
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RBA governor Philip Lowe said the case for a slower pace of tightening was becoming stronger.
On Tuesday, the RBA lifted rates by 50 basis points for the fourth month in a row.
"We are conscious that there are lags in the operation of monetary policy and that interest rates have increased very quickly," Dr Lowe told the Anika Foundation in Sydney on Thursday.
"And we recognise that, all else (being) equal, the case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises."
However, he reiterated that the board was "not on a pre-set path" and would do whatever was necessary to rein in rampant inflation.
Headline inflation hit 6.1 per cent in the June quarter, with the pace of inflation for the third quarter to be revealed in late October when consumer price index figures are released.
Several economists said Dr Lowe's rhetoric supported the view that future tightening will be downgraded to more moderate 25 basis point lifts, rather than the 50bps rises seen in recent months.
As such, NAB economists are sticking with their expectation of 25bps cash rate lifts in October and November, taking the cash rate to 2.85 per cent.
RBC Capital Markets economist Su-Lin Ong said Dr Lowe confirmed that the cash rate was getting closer to estimates of "neutral", which is where the RBA wants to get before hitting the brakes on the tightening cycle.
In his speech, Dr Lowe flagged three areas of uncertainty the board would be monitoring closely.
The first was the gloomy state of the global economy.
"Some slowing in the global economy will help bring inflation down, but a sharp slowing would make the job of delivering a soft landing here in Australia much harder," Dr Lowe said.
He said the bank was also carefully watching shifts in inflation psychology.
"If workers and businesses come to expect higher inflation, and wages growth and price-setting behaviour adjusts accordingly, the task of navigating that narrow path will be very difficult, if not impossible," Dr Lowe said.
He also said it was unclear how households would respond to higher interest rates, with the full effects of rapidly rising rates still playing out.
Australian Bureau of Statistics data released on Thursday showed the trade balance falling sharply in July.
The balance on goods and services almost halved, falling from $17.1b in June to $8.7b in July.
Leading the drop-off was a sharp fall in coal exports due to bad weather disrupting production and exportation, NAB's Tapas Strickland said.
Imports rose by 5.2 per cent to $46.5b for the month.
In the June quarter, strong exports and slowing imports made a one percentage point contribution to real GDP growth.
Payroll jobs also fell for the second month in a row, largely due to workers catching COVID and other winter illnesses.
The 0.8 per cent fall in August followed a 0.6 per cent drop in July.
Australian Associated Press
