SYDNEY, April 24 Reuters Australian consumer price inflation slowed less than expected in the first quarter as service cost pressures stayed stubbornly high, a disappointing result for policymakers that led markets to abandon hopes for any rate cuts this year.

The Australian dollar duly jumped 0.6 to 0.6522, while threeyear bond futures tumbled 15 ticks to 96.00, the lowest this year.

Spooked markets even moved to price in a minimal chance about 4 of a rate hike by August, while pricing out almost any bet of a rate cut this year. Total easing expected this year has been slashed to 3 basis points, down from 17 bps before.

Data from the Australian Bureau of Statistics on Wednesday showed the consumer price index CPI rose 1 in the first quarter, above market forecasts of 0.8.

The annual pace of CPI inflation, however, slowed to 3.6 from 4.1 thanks to base effects, but again came in above forecasts for an easing to 3.5. For March alone, the CPI rose 3.5 compared to the same month a year earlier, up from 3.4 in February.

A closely watched measure of core inflation, the trimmed mean, rose 1 in the first quarter, again above forecasts of 0.8. The annual pace slowed to 4, from 4.2.

It39;s higher than we were expecting, higher than what the market was expecting and higher than what the RBA would be expecting, so that 1 number will be something that they39;ll be alarmed about, said Madeline Dunk, an economist at ANZ that tipped for a first rate cut in November.

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