SYDNEY – Australian consumer prices rose by more than expected in April on a jump in fuel prices and strong gains in housing, suggesting sticky inflation will likely keep pressure on the central bank.
The consumer price index (CPI) rose 6.8 percent in April from a year earlier, Australian Bureau of Statistics data showed on Wednesday, compared with 6.3 percent in March and market forecasts of 6.4 percent.
On a monthly basis, CPI rose by a strong 0.8 percent from March. Prices excluding volatile fruit, vegetables and fuel and holiday travel, rose 6.5 percent in the year to April, down from 6.9 percent in March.
The Australian dollar hit a session high of $0.6538 after the data but soon unwounded gains on soft China data. Markets have nudged up the chances of a quarter-point hike next month to 28 percent, seeing terminal rates reach 4.1 percent by September, compared with 4.0 percent before.
“It now looks more likely than not that Q2 inflation will overshoot the RBAs forecast of 6.3 percent,” said Marcel Thieliant, a senior economist at Capital Economics.
“Coupled with the increasing strength of the rebound in the housing market and continued sluggish productivity growth, that will almost certainly convince the RBA to raise interest rates again, perhaps as soon as next week.”
The Reserve Bank of Australia has warned that more rate rises may be required to bring inflation back to target by mid-2025, having raised interest rates by 375 basis points since May last year to an 11-year high of 3.85 percent.
Australia central bank stuns market with 25-bps hike, says more might be needed
Economic data over the past month has largely been on the soft side. Retail sales were flat in April as consumers cut back spending on food and dining out, quarterly gains in wages missed forecasts and a red-hot labor market showed signs of cooling.
Australia retail sales flat in April as consumers cut back on food, dining out
Wednesday’s data showed the most significant drivers were an 8.9 percent jump in housing, a 7.9 percent increase in food and non-alcoholic beverages and a 7.1 percent rise in transport costs.