Australian Inflation Surges in Q4, Market Bays for Rate Hikes

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Australia's core inflation flew to its fastest annual pace since 2014 in the December quarter as fuel and housing costs led broad-based price pressures, a shock that will stoke market speculation of an early hike in interest rates, Reuters reported. Data from the Australian Bureau of Statistics out on Tuesday showed the headline consumer price index (CPI) rose 1.3% in the fourth quarter and 3.5% for the year, topping forecasts. The trimmed mean measure of core inflation favoured by the Reserve Bank of Australia (RBA) jumped 1.0% in the quarter, the largest increase since 2008. The annual pace picked up to 2.6%, above both the 2.3% forecast and the middle of the RBA's 2% to 3% target range. That will be a surprise to the RBA, which had expected core inflation would not reach 2.5% until the end of 2023, a major reason it did not expect to hike rates this year. That outlook will now be sorely challenged when the RBA Board meets on Feb.1. Analysts generally assume it will keep rates at 0.1% but could well call an end to bond buying, part of its quantitative easing campaign. Read more.
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