Australia ’s core inflation jumped to its fastest annual pace since 2014 in the December quarter as fuel and housing costs led broad-based price pressures on the large wave of global hikes.
Data from the Australian Bureau of Statistics out on Tuesday showed the headline consumer price index rose 1.3 per cent in the fourth quarter and 3.5 per cent for the year, topping forecasts. But the number was significantly lower compared to the U.S. and European rates 12 per cent and 8 per cent respectively.
Australia inflation rate is still lower more than half the levels seen in the United States, EU or UK.
The trimmed mean measure of core inflation favoured by the Reserve Bank of Australia rose 1.0 per cent in the quarter, the largest increase since 2008.
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.
Some economist suggested that the increase will be a surprise to the RBA, which had expected core inflation would not reach 2.5 per cent 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.
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, he added.
The main inflation's drivers were shortages in supplies, logistics and transportation companies prices.
A recent explosion of the virus cases has contributed to the picture, throttling consumer spending but also causing supply bottlenecks that could add to inflationary pressures.