The number: Headline inflation picked up to 1.1 per cent in March from a steady reading in February, pushing the consumer price index to 4.6 per cent on an annual basis, according to the Australian Bureau of Statistics. That’s up from 3.7 per cent in February and is the highest reading in almost three years.
Core inflation – the Reserve Bank of Australia’s preferred measure – picked up to 0.3 per cent in March from 0.2 per cent. On an annual basis, the underlying measure was steady at 3.3 per cent.
Consensus was for headline inflation to pick up to 1.3 per cent in March and 4.8 per cent over 12 months, while core was expected to come in at 0.3 per cent and 3.3 per cent, respectively.
On a quarterly basis, core inflation slowed to 0.8 per cent from 0.9 per cent, and on an annual basis it hit 3.5 per cent from 3.4 per cent.
Why it matters: This is the first inflation reading that captures the impact from the Iran war that erupted at the end of February and sent oil prices rocketing above $US100 a barrel.
What has changed: The RBA has raised interest rates twice this year to combat already hot inflation but with the higher oil price, the market is now pricing in an 88 per cent chance it will go again when the board meets next week. Governor Michele Bullock wants inflation to return to the 2.5 per cent mid-point.
What next: The Federal Reserve is due to make its latest rate decision on Wednesday (Thursday AEST) ahead of the RBA’s May 5 policy meeting.