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Investing.com-- Australian consumer price index inflation grew more than expected in the first quarter of 2024, remaining above the Reserve Bank of Australia’s target range and presenting the central bank with more cause to keep interest rates high.
CPI rose 3.6% year-on-year in the first three months of 2024, data from the Australian Bureau of Statistics (ABS) showed on Wednesday. The reading was higher than expectations of 3.4%, but fell from the 4.1% seen in the prior quarter.
On a quarterly basis, CPI rose 1.0% against expectations of 0.8%, while accelerating from the 0.6% seen in the fourth quarter of 2023.
Housing, food prices and healthcare costs were the biggest drivers of inflation in the quarter.
A monthly CPI indicator also showed inflation grew 3.5% year-on-year in March, more than expectations for a rise of 3.4%.
Wednesday’s readings showed that while inflation did ease further from 30-year highs hit in 2023, it still remained well above the Reserve Bank of Australia’s 2% to 3% annual target.
Easing inflation lessens the prospect of any more rate hikes by the RBA. But stickiness in inflation also gives the RBA more impetus to keep rates higher for longer- a trend that bodes poorly for Australia's economy.
The RBA had tempered its signaling on more interest rate hikes during its latest meeting. But the central bank had also outlined few plans to begin reducing rates, and had reiterated its warning on potential upsides in inflation.
Households are now likely to bear the double burden of sticky inflation and high mortgage rates- a trend that is expected to further erode savings and dent consumer spending.
The Australian dollar's AUDUSD pair shot up 0.5% after the inflation reading, given that higher-for-longer rates bode well for the currency.
The benchmark ASX 200 stock index however, trimmed early gains and traded sideways.
