Annual inflation jumped to a near 33-year high 7.8 per cent in the December quarter, below the Reserve Bank’s 8 per cent forecast, but underlying price momentum indicates further interest rate rises will be needed.
The result in the latest Australian Bureau of Statistics data was well above economist expectations of a 7.5 per cent increase through the year, but below the RBA’s most recent forecasts. “While this is expected to be the peak in inflation in this cycle, the RBA’s hawkish communications lead us to expect another rate rise in February, with another increase likely to follow in March.”Supporting that outlook, trimmed mean inflation, the RBA’s preferred measure that trims away large price movements, rose a 1.7 per cent over the quarter to 6.9 per cent annually, suggesting strong momentum in prices.Non-discretionary inflation, the goods and services people can’t do without, grew 1.
“Strong demand, particularly over the Christmas holiday period, contributed to price rises for domestic holiday travel and international airfares,” said Michelle Marquardt, head of price statistics at the ABS.
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