Australian inflation remains elevated, with the Consumer Price Index (CPI) holding steady at 3.8 per cent year-on-year in January, according to the Australian Bureau of Statistics. On a monthly basis, headline CPI was 0.4 per cent, a decrease from 1 per cent the previous month. The trimmed mean inflation, a key measure watched by the Reserve Bank of Australia (RBA), came in at 3.4 per cent year-on-year, exceeding market forecasts. Monthly trimmed mean inflation was 0.3 per cent. Market consensus had anticipated a 3.7 per cent annual CPI increase and a 0.3 per cent monthly rise.
The Australian dollar experienced a slight uptick of 0.2 per cent to US70.71¢ following the release of the higher-than-expected inflation figures. The RBA recently raised interest rates in an effort to curb inflation, which has been persistently above the central bank’s target of 2.5 per cent. A tight labour market is also contributing to inflationary pressures, complicating the RBA’s efforts to bring inflation under control.
Prior to the release of this data, bond markets had priced in a 76 per cent probability of another rate hike in May. RBA Governor Michele Bullock is scheduled to speak in Melbourne on Wednesday night, where she may provide further insights into the central bank’s perspective on inflation and future interest rate adjustments. The central bank is tasked with keeping inflation between 2-3 per cent, on average, over time.
