Source : Perth Now news
Inflation moderated in May as the effects of the Federal Government’s fuel tax relief artificially took the heat out of price pressures – and reduced the prospect of another interest rate hike soon.
The consumer price index dropped to 4 per cent in May, down an annual pace of 4.2 per cent in April.
While it’s good news, headline inflation has now been above the Reserve Bank’s 2-3 per cent target for the tenth straight month, meaning another interest rate rise is still possible, even if it doesn’t occur at the RBA’s next meeting in August.
Underlying inflation, without the volatile price items, actually rose to two-year high of 3.6 per cent, up from 3.4 per cent, as the 32-cent a litre reduction in fuel taxes artificially reduced headline but not core inflation.
Services inflation rose to 3.7 per cent, up from 3.5 per cent, with education costs climbing by 4.8 per cent over the year.
Nonetheless, the reduction in fuel prices saw goods inflation fall to 4.2 per cent, down from 4.7 per cent.
The Reserve Bank’s February and March rate rises, covered in the April data, caused housing costs to rise by 6.5 per cent over the year, with this figure reflecting increase in mortgage repayments and rents.
The 30-day interbank futures market sees the RBA leaving rates on hold in August but raising them in November to a 15-year high of 4.6 per cent.
More to come…
