Australia inflation grew to a tad 2.5% in 1Q13

Thanks to drop in food, clothing prices.

According to BBVA, Q1 inflation registered only 2.5% y/y (consensus: 2.8%), a slight increase from Q4 (2.2%) due to falling food and clothing prices. 

The trimmed-mean, which the RBA uses to gauge underlying inflation, also came in below expectations at 2.2% y/y (consensus: 2.4%).

Here's more from BBVA:

The outturn is well within the RBA's 2-3% target range and, together with softness in China’s commodity demand (on which Australia’s economy depends heavily) could reinforce expectations of another rate cut, in line with recent statements by the RBA that low inflation, "would afford scope to ease policy further, should that be necessary to support demand".

The AUD was little changed today, at around 1.027 against the USD. For the time being, our baseline remains of no more rate cuts.

The RBA cut rates by a cumulative 175 bps from November 2011 – December 2012 to 3.00% at present. The RBA will hold its next monthly policy meeting on May 7.