FXstreet.com (Barcelona) - According to Group Chief Economist Alan Oyster at NAB, "It is likely that the RBA has maintained its easing bias into the New Year, with little indication that previous monetary policy easing has provided a material boost to domestic demand."

Prior to the release of December quarter inflation data, we expected the RBA to pause in February before cutting in March - though we had acknowledged that the inflation outcome would be important as to exact timing. "Given the surprisingly low inflation print, it appears that the balance of risks has shifted towards a rate reduction in February. However, it will be a close run thing. Thereafter, we see the RBA waiting to reassess the impacts of its actions." Oyster adds.

However, with the unemployment rate expected to rise to 53D4% by mid-2013, we believe an additional two 25 bp rate cuts will be necessary (three in total), which we have temporarily penciled in for the months of May and August.

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