Australian Inflation Remains High, RBA Increasingly Hawkish
Australian inflation remains above the Reserve Bank of Australia (RBA) target ahead of next week's policy meeting, with rising fuel costs due to Middle East supply disruptions adding to already high price pressures. Australian Bureau of Statistics data on Wednesday showed the trimmed mean annual CPI rose 3.5% in the last quarter, in line with economists' estimates, while quarterly core inflation rose 0.8% (below the 0.9% forecast). The RBA targets inflation in the midpoint of the 2–3% range.
While the energy shock exacerbated the situation, domestic inflationary pressures were already worsening before the conflict, prompting the RBA to undertake consecutive interest rate hikes this year to bring demand back in line with supply capacity. With inflation remaining stubbornly stubborn amidst weak activity and rising unemployment, the market believes the RBA is likely to continue tightening for a third consecutive year.
If the RBA raises rates again on May 5, the cash rate could potentially rise to 4.35%, reversing all of last year's rate cuts. The RBA will also release its quarterly macroeconomic projections update, which is expected to show persistent inflationary pressures in the near term while GDP growth slows. Market focus will be on how the RBA balances inflation and growth risks, how long the inflationary boost from energy is expected to persist, and whether weakening activity creates sufficient spare capacity to return inflation to target within the projection horizon. (asd)
Source: Newsmake.id
