Headline inflation steady at 2.4pc in April while RBA's preferred measure edges up, but odds still on July cut
It is the third month in a row that headline inflation has been steady. The market had expected a slight easing of inflation in April, to 2.3 per cent.
The Reserve Bank's preferred measure of underlying, the trimmed mean, rose from 2.7 per cent over the year to March, to 2.8 per cent in April.
Both measures remain firmly within the central bank's 2 to 3 per cent target band, however the monthly data is more volatile than the quarterly consumer price index (CPI), which will next be released on July 30, which is after the RBA next meets.
The hotter-than-expected inflation figures mean the Reserve Bank may hold off cutting rates at its next meeting in July, according to some economists.
Last week, the RBA's quarterly statement on monetary policy forecast annual trimmed mean inflation would fall to 2.6 per cent in the June quarter.
"That's still quite possible, but today's April result has modestly heightened the chances of a greater than 2.6 per cent outcome [for the June quarter] — which could even see the RBA delay cutting rates in August all together," Mr Bassanese said.
However, he noted that it would be "premature to give up on RBA rate cuts this year", maintaining his forecast for at least two further cuts this year.
Market pricing still puts the probability of an 0.25 percentage point rate cut on July 8 at around 65 per cent.
"With underlying price pressures proving somewhat persistent, we don't think the RBA will cut rates as far as the markets are anticipating," Capital Economics senior economist of the Asia Pacific Abhijit Surya wrote.
The biggest contributors to the annual movement in prices were food and non-alcoholic beverages (up 3.1 per cent), housing (up 2.2 per cent) and recreation and culture (up 3.6 per cent).
"While annual inflation eased for most food categories in April, egg prices were up 18.6 per cent in the past 12 months.
"This comes as supply has been affected by bird flu outbreaks," ABS head of price statistics Michelle Marquardt said.
Holiday travel and accommodation inflation jumped from 3.9 per cent to 5.3 per cent, due to high demand around the Easter and ANZAC day holidays.
Health insurance inflation has also increased due to annual premium increases.
Electricity prices fell 6.5 per cent, as government subsidies continued to flow through.
"Without all the commonwealth and state government rebates, electricity prices would have risen 1.5 per cent in the 12 months to April," said Ms Marquardt.
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