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Forex Flash: RBA lacks grounds to cut rates from 3.00% – UBS

FXstreet.com (Barcelona) - The Reserve Bank of Australia already has an easing bias and that was reinforced this morning by Q1 CPI inflation remaining low. The headline rate rose by 0.4%q/q and 2.5% YOY compared with 2.2% YoY in Q4'12. However, the underlying measures of inflation were soft.

The trimmed mean, weighted mean and other core measures showed consumer prices rising by just below 2.5% YoY according to UBS Economics. Moreover, “assuming an impact of about 0.25% from the carbon tax, underlying CPI is increasing by 2.00-2.25% YoY i.e. at the base of the RBA's target band. This isn't sufficient to cause the RBA to cut interest rates from 3.00% at its next meeting. However, the onus is on domestic data to pick up to prevent further easing.” notes the UBS Research Team.

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