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SYDNEY, May 6 (Reuters) - Australian shares recovered from early losses on Friday to finish slightly higher as the odds shortened for another cut in interest rates this year after the central bank slashed its inflation forecasts.
The S&P/ASX 200 index .AXJO climbed 0.25 percent, or 12.94 points, to 5292.00 at the close of trade. The benchmark recovered after falling as much as 1.5 percent earlier in the session.
In its 66-page quarterly report, the Reserve Bank of Australia (RBA) said it now expected underlying inflation to be at just 1 to 2 percent for 2016, below its medium term target of 2 to 3 percent. Zealand's benchmark S&P/NZX 50 index .NZ50 gained 0.32 percent, or 21.63 points, to finish the session at 6898.11.