Australia’s [B]Producer Price Index[/B] unexpectedly fell in the first quarter, bringing the annual pace of wholesale inflation to 15-month low at 4.0%. The reading points to downward pressure on consumer prices (the headline inflation gauge) as companies pass on lower production costs via cheaper finished goods, giving the Reserve Bank of Australia scope for to cut interest rates again as the economic downturn deepens. Although the central bank has signaled the easing cycle is over, Westpac Banking Corp’s chief economist Bill Evans said last week the decision to hold off lowering rates now is likely a tactical one given the confidence boost typically seen after such actions: “We expect the bank will see the need to have ample capacity to be cutting rates through the second half of 2009…The economic case for cutting rates is undeniable.” The Westpac Leading Index fell -5.1% in the year to February, the worst since 1982, convincing Evans that “the Australian economy will enter a recession.”