The Reserve Bank governor has denied inflation is \u201ctaking off\u201d after new data showed price rises had persisted into 2026 and boosted bets on two more interest rate hikes.<\/p>\n
Annual inflation stayed at a high 3.8% in January, as the end of government subsidies drove electricity costs up by 19% in the month and left power bills nearly a third higher than they were a year earlier.<\/p>\n
The whiplash caused by the end of the federal and state electricity rebates has largely explained the doubling in the headline rate of inflation in just over six months.<\/p>\n
Electricity bills per quarter <\/a><\/p>\n Even after removing these wild swings in prices, however, the latest Australian Bureau of Statistics figures showed the central bank\u2019s preferred measure of underlying inflation climbed to 3.4% in the year to January, from 3.3% in the month before.<\/p>\n The Reserve Bank governor, Michele Bullock, did not raise the alarm when she spoke at a University of Melbourne dinner on Wednesday evening, saying it would take time for the RBA to determine its next move.<\/p>\n \u201cI think we will have to be patient,\u201d she said.<\/p>\n The economy and the jobs market were still a \u201clittle bit tight\u201d after interest rates had risen earlier in February but supply and demand were close to balance, Bullock said.<\/p>\n \u201cInflation is a bit elevated \u2013 I don\u2019t think we think it\u2019s taking off again but it\u2019s a little bit elevated,\u201d she said.<\/p>\n Financial markets had upped their bets on rate rises after the inflation data released, according to NAB, with the odds on a rate hike in May rising from 84% to 95% and the chance of a third by the year\u2019s end up from 40% to 60%.<\/p>\n After Bullock\u2019s speech, though, traders were less confident there would be rapid rate rises, with rate-sensitive markets losing close to half the day\u2019s gains.<\/p>\n Sign up: AU Breaking News email<\/a><\/p>\n Inflation remains strong in areas many Australian households will struggle to avoid.<\/p>\n The ABS figures showed climbing prices for essentials, including a 3.9% rise in rents and a 4.2% jump in medical and hospital services in the year to January.<\/p>\n Already high construction costs continued to climb at a rapid pace, with home building inflation accelerating to 3.5%, from 3% in December.<\/p>\n Stephen Smith, a partner at Deloitte Access Economics, said the ongoing price pressures were \u201cthe political payback of a populist policy\u201d by federal and state governments to subsidise energy prices from mid-2023.<\/p>\n