Australian Q1 inflation data was published yesterday, info here (and links for more):

• ForexLive Asia-Pacific FX news wrap: Minor moves for major FX again

Commerzbank says the lower rate of inflation in Q1 is enough to keep the RBA on hold at its next meeting:

RBA can't really breathe a sigh of relief yet, but it can breathe a little.

• Inflation fell quite significantly in the first quarter, from 7.8% to 7.0%. The two measures of core inflation also fell noticeably to 6.6% and 5.8%. This is likely to confirm the RBA's expectation that inflation will gradually decline and that the interest rate pause earlier this month was justified
• The data suggest that the RBA will not raise the key rate next week either, but leave it at 3.60%. However, with core inflation still well above the 2-3% inflation target, it is likely to maintain the restrictive undertone in its statement and assure that it is ready to do more should it be necessary
• “The market already expects that the interest rate cycle in Australia is over and that no more rate hikes will follow, but that the first rate cuts are on the agenda in the fall

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Not that last bullet point, where the analyst refers to "the fall'. This is a northern hemisphere reference, it's already "fall" (Autumn) here in Australia, Commerzbank here referring to Australian Spring.

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Australian inflation appears to have peaked. I suspect it will remain elevated above the top of the target band (which is 2 to 3%) for quite some time to come and rate cuts will be a long time coming.

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The Reserve Bank of Australia meet on May 2, the statement is due at 2.30pm local time, which is 0430 GMT, and 0030 US Eastern time.

This article was written by Eamonn Sheridan at www.forexlive.com.

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