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Australian Inflation Accelerates In Policy Bind For Rba: Economy

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Australia’s core consumer prices gained more than economists forecast last quarter, sending the Australian dollar to its highest in two weeks and creating a hurdle to further monetary policy easing.

The trimmed mean gauge rose 0.8 percent from the previous quarter, the Bureau of Statistics said, compared with the median forecast of 25 economists for a 0.6 percent gain.

The currency rose as investors pared bets on a further cut to the record-low 2.5 percent benchmark cash rate. Accelerating inflation poses a dilemma for central bank Governor Glenn Stevens, who this month resumed signaling that he’d prefer a weaker currency and is facing a slowdown in growth as mining investment wanes and the government cuts spending.

“Lowering the currency will be more difficult as it’s harder for the RBA to convincingly say that they’re likely to cut interest rates further when they’ve got inflation in the upper part of their target band,” said Paul Bloxham, chief Australia economist at HSBC Holdings Plc in Sydney and a former Reserve Bank of Australia economist.

I thought everyone wanted inflation? We get higher inflation and now people are upset!

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