Rate rise rumbles
After a worse-than-expected monthly inflation reading, economists say an RBA rate hike in August is a very real prospect.
It was always going to be a bad day for inflation. But you could almost hear a collective gasp from economists this morning when the monthly CPI rose 4% in the 12 months to May. It was well above the 3.6% reading in the year to April and worse still than the 3.8% they’d been expecting.
Many economists are now saying the next RBA meeting, in August, may well result in yet another rate rise. And the markets dropped as a result.
The usual caveats are required here. As Treasurer Jim Chalmers is fond of reminding us every time the monthly numbers are too high, this data set is not as comprehensive as the quarterly figures (due at the end of July). And the final stages of the inflation fight were never going to be a smooth ride. There was also one small positive in the numbers. The underlying rate — which strips out volatile items like fuel, fruit and vegetables — fell slightly.
There’s also a chance this may resolve itself. ANZ senior economist Catherine Birch is among those reminding us that the US had an upswing in inflation earlier this year and then got back on track. She suggested it’s “possible” Australia will be similar.
