By Stella Qiu
SYDNEY (Reuters) -Australian consumer price inflation unexpectedly picked up to a five-month high in April due in part to increases in petrol, health and holiday costs, adding to the existing small risks the next move in interest rates might be upward.
Data from the Australian Bureau of Statistics on Wednesday showed its monthly consumer price index (CPI) rose at an annual pace of 3.6% in April, up from 3.5% in March and above market forecasts of 3.4%.
A closely watched measure of core inflation, the trimmed mean, also accelerated to an annual 4.1%, from 4.0%. The CPI excluding volatile items and holiday travel stayed at an annual 4.1%.
The data pushed up the Australian dollar by 0.1% to $0.6655 while three-year bond futures extended earlier declines to be down 13 ticks to 95.92.
Markets slightly increased the chance of a quarter-point hike in September to 17% from 12%, while maintaining bets that any rate relief would not come until August or September next year.
“Inflation has been relatively stable over the past five months, although this is the second month in a row where annual inflation has had a small increase,” said Michelle Marquardt, ABS head of prices statistics.
Complicating matters for policymakers, the April monthly report is heavily skewed towards goods in the first month of the quarter and do not capture price changes for a range of services, which tend to be sticky.
The Reserve Bank of Australia has already expressed a willingness to avoid “excessively fine-tuning” policy even as the central bank judged the risks to inflation had risen somewhat recently after a surprisingly strong first quarter CPI report.
For April alone, CPI rose 0.7% from the previous month, driven by a 4% jump in prices for clothing and footwear and a 2% increase in health costs.
Holiday travel and accommodation prices rose 4.6%, the first monthly rise this year due to high demand for international travel over the Easter and school holiday periods.
The RBA has raised interest rates by 425 basis points since May 2022 to a 12-year top of 4.35%, but steadied its hand for four straight meetings since its last hike in November as cautious consumers scaled back their spending and the economy slowed to a crawl.
It has kept markets somewhat on edge, however, by not ruling in or out any changes in policy.
(Reporting by Stella Qiu and Wayne Cole; Editing by Tom Hogue and Shri Navaratnam)
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