SYDNEY, Jan 25 ― 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.
The annual pace picked up to 2.6 per cent, above both the 2.3 per cent forecast and the middle of the RBA's 2 per cent to 3 per cent target range. “The RBA is all but certain to end its asset purchase scheme at its meeting next week,” said Ben Udy, an economist at Capital Economics. “Our expectation for wage growth to firm up over the course of this year means the Bank should have enough evidence to hike rates by November.”
Today's data emboldened markets, which have long wagered the RBA was behind the curve on inflation and would have to tighten early, perhaps even by May this year. Wages have also been more restrained in Australia with annual growth running at just 2.2 per cent, less than half the pace of the US and UK.
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