SYDNEY (Reuters) -Australian consumer price inflation unexpectedly surged to a five-month high in April. Increases in petrol, health, and holiday costs contribute to this trend, suggesting stable interest rates.
Wednesday’s data from the Australian Bureau of Statistics revealed a 3.6% annual increase in the consumer price index (CPI) for April. This surpasses market expectations and marks a slight uptick from March’s 3.5%.
Moreover, a closely watched measure of core inflation, the trimmed mean, also accelerated to an annual 4.1%, from 4.0%. The CPI excluding volatile items and holiday travel stayed at an annual 4.1%.
Market reaction remained subdued; the Australian dollar rose only 0.1% to $0.6657. Meanwhile, three-year bond futures dropped another 2 ticks to 95.93.
Swaps slightly increased the chance of a quarter-point hike in September to 20% from 12%, while doubling down on their bets that any rate cut would not come until August or September next year, some 15 months away.
Economists’ consensus, however, is for the RBA to begin its easing cycle in the fourth quarter.
“This was not just “one of those statistical flukes” caused by a big surge in one or two components due to seasonal distortions or supply interruptions,” said Robert Carnell, regional head of research, Asia-Pacific, at ING.
Carnell abandoned his call for one rate cut this year after the data.
In conclusion, the acceleration of Australia’s inflation rate to a 5-month high serves as a wake-up call for policymakers and investors.
Moving forward, proactive measures may be necessary to mitigate the impact of inflation on the economy and ensure sustainable economic development.
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