{"id":655439,"date":"2026-06-24T07:52:09","date_gmt":"2026-06-24T07:52:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/655439\/"},"modified":"2026-06-24T07:52:09","modified_gmt":"2026-06-24T07:52:09","slug":"interest-rate-hikes-remain-on-cards-as-australias-underlying-inflation-climbs-economists-warn-interest-rates","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/655439\/","title":{"rendered":"Interest rate hikes remain on cards as Australia\u2019s underlying inflation climbs, economists warn | Interest rates"},"content":{"rendered":"

Australia\u2019s inflation challenge is far from over and more Reserve Bank rate hikes remain on the cards<\/a>, economists warn, even after a plunging petrol costs drove an unexpected fall in consumer price growth in the year to May.<\/p>\n

Annual inflation dropped to 4%, from 4.2% in the year to April, according to the Australian Bureau of Statistics, dragged down in large part thanks to a nearly 12% drop in fuel prices in the month of May.<\/p>\n

The consensus view among experts had been for inflation to accelerate to 4.4%; but the flattering \u201cheadline\u201d result masked a further lift in underlying price pressures.<\/p>\n

The ABS\u2019s trimmed mean measure of inflation \u2013 which is preferred by the RBA<\/a> as it removes large, temporary price swings \u2013 climbed to 3.6% in the year to May, from 3.4% the month before.<\/p>\n

Underlying and headline rate inflation.<\/a>Underlying and headline rate inflation.<\/p>\n

Jim Chalmers welcomed the lower headline rate of inflation, even as he said his government was not \u201ccomplacent\u201d about the risks<\/a>.<\/p>\n

\u201cWe know that there are still inflationary pressures in our economy. But these numbers today are much better than the market expected, much better than forecast, and that\u2019s obviously a very good thing,\u201d the treasurer said.<\/p>\n

Sign up for the Breaking News Australia email<\/a><\/p>\n

Evidence that higher fuel costs were being passed through the supply chain was apparent in the 0.9% increase in home building costs in the month of May, which was the most since late 2022.<\/p>\n

That lifted the annual pace to a very strong 5.6%, the ABS figures showed.<\/p>\n

Food and drink inflation also accelerated to 3.3% in the year to May, versus 2.8% in April. That included a 4% increase in restaurant and takeout meals.<\/p>\n

The mixed messages from the consumer price report left interest rate predictions largely unchanged.<\/p>\n

The probability of a rate hike on 11 August, according to financial markets, inched up to a 32% chance, while the chance of an increase by the end of this year remained at 56%.<\/p>\n

Sally Auld, the chief economist at NAB, said Wednesday\u2019s price report suggested headline inflation would peak well below the 5% rate predicted in the federal budget for the year to June.<\/p>\n

Auld\u2019s said \u201cat the margin, the pressure to take interest rates higher isn\u2019t as compelling\u201d. She predicted the next move in rates would be a down \u2013 although mortgage relief would not arrive for another year.<\/p>\n

\u201cThis lower inflation print combined with further evidence the economy is slowing<\/a> a bit more than thought means the RBA may take a less hawkish tone when they next meet,\u201d she said.<\/p>\n

But Shane Oliver, AMP\u2019s chief economist, said the fact that underlying inflation had come in a little hotter than expected in May had reinforced his expectation that the RBA would hike for a fourth time in August.<\/p>\n

Oliver said the central bank was worried about not acting soon enough to prevent a high inflation psychology taking hold.<\/p>\n

\u201cThere\u2019s probably still more impact to come to food prices from higher fertiliser prices, and that\u2019s going to worry the RBA,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"Australia\u2019s inflation challenge is far from over and more Reserve Bank rate hikes remain on the cards, economists…\n","protected":false},"author":2,"featured_media":242610,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,1294,56,54,55],"class_list":["post-655439","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/655439","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=655439"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/655439\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/242610"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=655439"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=655439"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=655439"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}