Iran’s longest-range attack yet targets US-UK base as nuclear site hit again; Israel warns of a ‘significant’ surge in attacks
Money markets have doubled down on bets that the RBA will make another move in May, amid rising inflation expectations as the war drags on.
The central bank will closely scrutinize February inflation data due to be published by the Australian Bureau of Statistics on Wednesday.
Belinda Allen, Commonwealth Bank’s head of Australian economics, said the statement would provide an update on how prices were trending before the conflict.
He expects annual headline inflation to fall from 3.8 percent to 3.7 percent, driven in part by a 2.8 percent drop in fuel costs.
Gas prices approaching $3 per liter means the calm before the storm.
NAB senior economist Taylor Nugent said the ABS’s February reference period preceded the latest rise in fuel prices, which are set to rise above 25 per cent by March.
“Overall, the cost shock from the Middle East will emerge first and most clearly through automotive fuel prices, which will contribute approximately one percentage point to the March CPI, bringing the year-end rate to around 4.6 percent,” he said.
He said that higher flight tickets will be issued for domestic flights starting from April and for international flights starting from May, and that high costs in other sectors such as transportation, logistics, agriculture, packaging, manufacturing and construction will become evident in the coming months.
None of these will appear in Wednesday’s data.
But luckily for the RBA, March inflation data will be published before the next meeting in May, providing a much clearer impression of the direction of the post-conflict economy.
The rise in fuel costs will not show up in the RBA’s preferred three-month truncated average measure of inflation, which excludes variable items.
Nugent said the bulk of the impact would only be felt in the June quarter as the price increase came later in the quarter, with NAB currently forecasting headline inflation to peak at 5 per cent.
AAP
