Australia’s faster inflation in May raises risk of Reserve Bank rate hike

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Australia’s inflation accelerated faster than expected for a third straight month in May, sending the currency higher as traders boosted bets that the Reserve Bank will resume raising interest rates at its next meeting.

The monthly consumer price indicator climbed 4 percent from a year earlier, exceeding economists’ estimate of 3.8 percent, government data showed Wednesday. The trimmed mean core measure, which smooths out volatile items, advanced to 4.4 percent versus 4.1 percent a month earlier.

The report comes after RBA Governor Michele Bullock restated last week that the rate-setting board isn’t ruling out a rate hike after leaving the benchmark at a 12-year high of 4.35 percent. Central bank officials have frequently cautioned about reading too much into the monthly figures, given they only provide a partial picture of prices in the economy whereas the quarterly report delivers a complete overview.

Treasurer Jim Chalmers tried to play down the implications of the spike in prices. “We’ve seen around the world that inflation can zig and zag on its way down, it doesn’t always moderate in a straight line and the last mile can be a bit harder,” he said.

 

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