Australia CPI inflation rises slightly more than expected in Q1

Australia CPI inflation rises slightly more than expected in Q1
© Reuters. — Australian consumer price index inflation rose slightly more than expected in the first quarter of the year, data showed on Wednesday, remaining close to 30-year highs and potentially attracting more measures by the Reserve Bank to curb price pressures.

CPI inflation rose an annualized 7% in the first three months of the year, slightly above expectations for a rise of 6.9%, but lower than the prior quarter’s reading of 7.8%, data from the Australian Bureau of Statistics (ABS) showed.

On a quarterly basis, CPI inflation rose 1.4% in the first quarter, more than expectations for a rise of 1.3%, but still at its slowest pace since December 2021.

A monthly indicator on CPI inflation rose 6.3% in March, data from the ABS showed, easing for a third straight month after hitting an over-30-year peak of 8.4% in December.

The quarterly increase in inflation was largely driven by higher costs for medical services, education, fuel, and increased holiday spending.

“While prices continued to rise for most goods and services, many of these increases were smaller than they have been in recent quarters,” Michelle Marquardt, ABS head of prices statistics said in a statement.

While Tuesday’s data did show that inflation was easing in the country, amid higher interest rates and slowing economic growth, it was doing so at a slower-than-expected rate, which could attract more policy tightening measures by the Reserve Bank of Australia (RBA).

The bank had paused a year-long rate hike cycle earlier in April, and is widely expected to keep rates steady, while providing an updated outlook on the economy when it meets next week.

But the RBA also warned that any signs of sticky inflation could attract more rate hikes. The bank had hiked interest rates by a cumulative 350 basis points over the past year, as it moved against a post-COVID surge in inflation.

The Australian dollar was largely flat on Wednesday after the reading, given that it provides somewhat mixed signals on the path of monetary policy.