I caught up with Ausbiz TV today to talk about the future for interest rates here in Australia (audio below). As discussed, all eyes will be on Australia's quarterly inflation this week.

The market is expecting 6-6.5%, consensus is at 6.3%. But here's the thing, the inflation rate doesn't really matter because it is a backward indicator. A lot has happened since the end of June and we think that the inflation rate has already peaked because many of the driving components, particularly oil prices, are already coming down. 

It's important to distinguish between inflation and the inflation rate. We don't think inflation has gone away, but we do think that the rate itself has peaked and over the next few quarters, central bank rate hikes will be successful in driving the rate back down into the low single digits. 

Bottom line: Oil prices are down around 20% from the 2Q peak and now finding support near the $90-100 per barrel level. Housing and asset prices have moderated. 

To us the most important number to watch is the US 10 year bond yield, the leading global indicator for medium term growth and inflation. It's now sitting at 2.75%, which is around 50-75bpts lower than its peak in 2Q. That means rising rates will temper growth and inflation. 

We're going through a short term inflation shock will central banks will have under control. Central banks, including the RBA, will be mindful of doing enough but not too much. More of our comments on inflation here.