Australia's Core Inflation Remains Above Target, Market Anticipates Hawkish RBA Stance

Australia's core inflation rate for April remains above the upper limit of the Reserve Bank of Australia's (RBA) target range, reinforcing market expectations of a continued hawkish stance by the RBA despite consecutive rate hikes this year. According to Jin10, data released on Wednesday shows that the closely watched core inflation measure, the annual trimmed mean inflation rate excluding volatile items, rose by 3.4% year-on-year, aligning with economists' expectations. The RBA aims to keep inflation near the midpoint of its 2%-3% target range. Interest rate swap markets currently price in a roughly 50% probability of another rate hike in August, down from 64% before the data release. The Australian economy is showing signs of strain under the dual pressures of high borrowing costs and surging fuel prices driven by the war in Iran. The unemployment rate in April rose to a four-and-a-half-year high, with about one-third of businesses reporting a decline in revenue over the past four weeks and half experiencing increased operating costs. The market widely expects the RBA to keep the cash rate unchanged at 4.35% in June after raising rates at the first three meetings of the year. Sue-Ellen Luke, head of price statistics at the Australian Bureau of Statistics, noted, "Automotive fuel prices remain 23.5% higher than before the Middle East conflict. The impact of rising oil prices is also reflected in goods and services with higher transportation and logistics costs."