SYDNEY (Reuters) – Australian businesses conditions moderated for a third straight month in December, while price pressures began to ease, pointing to a likely peak in inflation, according to a business survey issued on Tuesday.

The results may reduce pressure on the Reserve Bank of Australia to increase interest rates at its next policy-setting meeting, on Jan. 31.

The survey from National Australia Bank Ltd (NAB) showed its index of business conditions had fallen 8 points to +12 in December, although it remained still well above its long-run average.

The measure of confidence, on the other hand, improved 3 points to -1, remaining in negative territory for a second straight month.

“Overall, the survey continues to point to a healthy level of activity with above average conditions and elevated capacity utilisation but a slowing in momentum with most indicators pulling back over the past three months or so,” NAB said in a statement.

“With confidence still in negative territory and well below average, and forward orders moderating further in the month, there are signs that conditions may ease further.”

The survey showed inflation easing across the board. The RBA’s board will consider whether to raise its policy interest rate for a ninth time at its next meeting.

Labour costs in the three months to December were 2% higher than in the three months to September. This showed a moderation in wage inflation, because in the September-November period labour costs had been 2.8% higher than three months earlier.

Purchase cost inflation also slowed in the same periods, to 2.5% from 3.9%, while growth in final product prices eased to 1.5% from 2.0%.

So far, markets are still inclined to think the central bank will raise its 3.1% cash rate by another quarter point, but they have also priced in a 40% chance it will pause, given that interest rates have climbed by 300 basis points since May.

A consumer inflation report due on Wednesday is expected to be critical in determining the near-term outlook for interest rates.

Economists polled by Reuters expect the report to show that October-December quarter consumer prices were 7.5% higher than a year earlier, compared with the 7.3% annual rise seen in the previous quarter. That will still be below the forecast from the RBA for a peak inflation rate of around 8%.

Other signs of a slowdown in business conditions include NAB’s measure of sales, which slipped 9 points to a however still strong reading of +18 and above pre-pandemic levels.

Profitability edged 7 points lower to +12, while the employment index also dipped 5 points to +8, still high from a historical perspective.

Capacity utilisation also eased off from record high levels to 83.7%.

“A key theme of 2023 will be just how quickly inflation moderates after peaking in late 2022 – and ultimately whether the RBA has done enough to bring inflation back to target,” said NAB.

“We continue to expect inflation to track lower across 2023 and 2024, returning to around the top of the target band in late 2024.”

(Reporting by Stella Qiu; Editing by Bradley Perrett)