SYDNEY (Thomson Financial) - The TD Securities-Melbourne Institute monthly
inflation gauge rose by 0.5 percent in April, following a 0.4 percent rise in
March, TD Securities said on Monday.
In the year to April, the inflation gauge rose by 4.3 percent, the highest
annual increase in the history of the series.
The year-end inflation gauge has now been running at or above 4.0 percent
for the last three months with the results being consistent with official
inflation data for the first quarter, keeping the Reserve Bank of Australia
(RBA) on a tightening bias.
Contributing most to the overall increase in the TD Securities-Melbourne
Institute April inflation gauge were price rises for health services, rental
accommodation, financial services and automotive fuel.
The rises were partially offset by falls in the prices of vegetables, and
audio, visual and computing equipment.
The price of automotive fuel for the 12 months to April rose 2.6 percent,
while the price of rental accommodation rose by more than 12 percent.
"With inflation accelerating in April, we are tempted to change our view
that the next move in Australian interest rates is down," said Joshua
Williamson, a senior strategist at TD Securities.
The central bank's board holds its monthly policy meeting tomorrow but it is
not expected to lift its official cash rate, now at 7.25 percent, preferring
instead to see whether recent hikes in the rate to a 12-year high are having the
desired effect of quelling domestic demand. The latest rate hike was on March 4.
Williamson said a rate cut before year-end is looking increasingly remote as
inflation remains at a level well above the RBA's target range of an annual rate
of 2 to 3 percent.
"If April's strong increase in inflation continues in the months ahead and
is reflected in the official CPI data, the RBA may even be tempted to increase
interest rates despite clear evidence of a slowing in domestic demand," he said.
bruce.hextall@thomsonreuters.com
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