By James Glynn
SYDNEY–The Reserve Bank of Australia appears set to raise its official cash rate next week for the first time since 2010 after first-quarter inflation data revealed a broad-based surge in price pressures across the economy, the likes of which haven’t has been seen in over two decades.
Trimmed mean inflation, the RBA’s preferred measure, increased to 1.4% in the first quarter, its biggest quarterly rise since the measures was introduced in 2002, the Australian Bureau of Statistics said Wednesday.
In annual terms, trimmed mean inflation increased to 3.7%, up from 2.6% in the fourth quarter of 2021, the fastest annual pace of increase since 2009, the ABS added.
The consumer price index, or headline inflation, rose 2.1% in the first quarter and 5.1% annually.
Both core and headline measures of inflation in the first half easily beat the expectations of most market quarter economists, suggesting the RBA will need to raise interest rates sharply in the second half if it is to get inflation back under control.
A certain level of controversy will surround a move by the RBA to raise interest rates at its policy meeting on Tuesday, with a federal election due on May 21. While the RBA operates independently of the government, the last pre-election rate hike was in 2007, which preceded the ousting of the Liberal-National coalition government, led by John Howard.
ABS Head of Prices Statistics Michelle Marquardt said the CPI recorded its largest quarterly and annual rises since the introduction of a 10% goods and services tax in July 2000.
The most significant contributors to the growth in inflation pressures were the cost of new dwellings, which climbed 5.7% on-quarter; automotive fuel costs which rose 11.0%; and tertiary education fees which jumped 6.3%.
Continued shortages of building supplies and labor, heightened freight costs and ongoing strong demand contributed to price rises for newly built dwellings. Fewer grant payments to home builders made this quarter also contributed to the rise, the ABS said.
Write to James Glynn at [email protected]
Credit: www.marketwatch.com /