Australia Inflation Surge Heightens Rate Hike Risks in May
Australia's consumer price index (CPI) rose by 4.0% in the 12 months to May, surpassing expectations and marking an increase from April's 3.6%, according to the Australian Bureau of Statistics. This acceleration in inflation has heightened speculation about a potential interest rate hike by the Reserve Bank of Australia (RBA) as early as August. The primary contributors to the annual rise in inflation were higher costs for housing, food, non-alcoholic beverages, and transport.
Market reactions included a 0.4% increase in the Australian dollar and a drop in three-year bond futures to their lowest level in three weeks. The RBA, which has maintained interest rates at a 12-year high of 4.35%, has indicated that all policy options remain open and has expressed vigilance towards potential inflationary pressures. Futures markets have largely ruled out any rate cuts this year, with the first potential easing now expected in late 2025, contingent on the outcome of the full second-quarter CPI report.
