Inflation figures cause interest rate speculation
(28 April 2011 – Australia) The Reserve Bank of Australia (RBA) is likely to raise interest rates after inflation rose faster than expected in the first quarter of this year.
The Australia dollar extended its run above US$1.08 to a new 29-year peak after inflation figures for the March quarter went public.
The RBA may wait for more evidence before it raises the official cash rate, which is still at 4.75 percent since it was lifted in November.
The March quarter headline rate of Consumer Price Index (CPI) jumped by 1.6 percent, surpassing economists’ expectations of a 1.2 percent lift. The result meant annualised inflation reached 3.3 percent which is well outside of the RBA's two to three percent management bracket.
But underlying inflation, the most closely watched measure of prices which strips out volatility and is used by the RBA in its policy deliberations -- was up 0.85 percent for the quarter and 2.25 percent for the year. The market had expected 0.6 percent quarterly increase and a 2.1 percent annualised result.
Treasurer Wayne Swan said he was not surprised in 'the cost of living rise'.
'Today's figures show an unsurprising spike in inflation caused by summer floods and Cyclone Yasi,' Mr Swan told reporters in Canberra.
Mr Swan said he expects the RBA may look beyond temporary price spikes, saying they tend to look at what the longer term outcome is and that the government wants to make sure that in the medium term and the longer term they are ensuring no excessive price measures.
The data from the Australian Bureau of Statistics showed that headline inflation increase was driven by a 16 per cent increase in vegetable prices and a 14.5 per cent lift in fruit prices, as a result of the January floods and Cyclone Yasi in Queensland.
The price increases would have been stripped out of the underlying inflation result.
The RBA may wait for more evidence before it raises the official cash rate, which is still at 4.75 percent since it was lifted in November.
The March quarter headline rate of Consumer Price Index (CPI) jumped by 1.6 percent, surpassing economists’ expectations of a 1.2 percent lift. The result meant annualised inflation reached 3.3 percent which is well outside of the RBA's two to three percent management bracket.
But underlying inflation, the most closely watched measure of prices which strips out volatility and is used by the RBA in its policy deliberations -- was up 0.85 percent for the quarter and 2.25 percent for the year. The market had expected 0.6 percent quarterly increase and a 2.1 percent annualised result.
Treasurer Wayne Swan said he was not surprised in 'the cost of living rise'.
'Today's figures show an unsurprising spike in inflation caused by summer floods and Cyclone Yasi,' Mr Swan told reporters in Canberra.
Mr Swan said he expects the RBA may look beyond temporary price spikes, saying they tend to look at what the longer term outcome is and that the government wants to make sure that in the medium term and the longer term they are ensuring no excessive price measures.
The data from the Australian Bureau of Statistics showed that headline inflation increase was driven by a 16 per cent increase in vegetable prices and a 14.5 per cent lift in fruit prices, as a result of the January floods and Cyclone Yasi in Queensland.
The price increases would have been stripped out of the underlying inflation result.
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