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Reluctance to inflict pain comes back to bite the RBA

We aren't convinced that the further pick-up in trimmed mean inflation in the Monthly CPI Indicator in April will be replicated in the quarterly measure that the Reserve Bank of Australia considers more reliable. And with consumption growth set to remain very weak this quarter, the hurdle for another rate hike is high. Nonetheless, the key risk is that the likely rebound in real household incomes across the second half of the year will be accompanied by a pronounced rebound in consumption growth at a time when inflationary pressures haven't been brought to heel yet. Accordingly, the RBA won't be able to lower interest rates this year.

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