Households could be served with another rate hike before the end of the year after surging petrol prices pushed inflation higher, defying a broader easing of cost pressures since December last year.
Annual inflation rose to 5.2 per cent in August, up from 4.9 per cent in July, as price pressures intensified, the Australian Bureau of Statistics said on Wednesday.
The figure were in line with market’s expectations that price pressures would accelerate and calls into question expectations that the RBA will keep rates on hold.
Earlier this month, the minutes of RBA’s board meeting showed the case to raise the cash rate was based on the risk that inflation remained above the bank’s target for an extended period.
“This could occur … if high services price inflation is more persistent than expected,” the minutes read.
Services inflation, a measure that more closely reflects spiralling rent and energy prices, has remained stubbornly high, and will be an important factor for whether the RBA decides to hike again.
Before the release of August’s monthly inflation print, analysts had cautioned that the reading had a higher representation of still-high services inflation, which had not been fully accounted for in previous monthly readings.
The fresh inflation figures come ahead of the October RBA board meeting next Tuesday – newly installed governor Michele Bullock’s first at the help – where members will weigh up whether to hike or hold the official cash rate, which currently sits at 4.1 per cent.
While the RBA still considers the Bureau of Statistics’ quarterly inflation reading as the best gauge of price pressures across the economy, the newly established monthly indicator still factors into the central bank’s thinking on rates decisions particularly in the event when it delivers a shock result.
More to come.