Australian Consumer Price Index (CPI) inflation rose more than anticipated in April, raising fresh concerns that the Reserve Bank of Australia (RBA) may need to maintain high interest rates to curb price pressures.
According to data from the Australian Bureau of Statistics released on Wednesday, CPI inflation increased by 3.6% year-on-year in April, surpassing expectations of 3.4% and slightly up from 3.5% in March. This indicates that inflation remained robust after exceeding expectations in the first quarter, marking the second consecutive month of higher-than-expected growth.
Excluding volatile items such as fuel, fresh food, and holiday spending, core CPI inflation held steady at 4.1% in April, suggesting that underlying price pressures remained persistent.
The latest reading shows inflation continuing to exceed the RBA’s target range of 2% to 3% annually. The RBA forecasts that inflation will fall within its target range by the end of 2024 and stabilize comfortably within the range by mid-2025.
Persistently high inflation is likely to compel the RBA to maintain elevated interest rates for an extended period. The ongoing stickiness of inflation could also reignite concerns about potential further interest rate hikes by the RBA.
Following the release of the data, Australian stocks declined, with the ASX 200 benchmark dropping 1%. Conversely, the Australian dollar (AUD/USD pair) saw a slight increase.
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