Australian CPI Inflation Rise Adds Pressure On Reserve Bank Of Australia

Inflation in Australia continued to run hot in May, surpassing forecasts, according to a report released earlier in the morning. Although Australian consumers and home buyers find it hard to adjust their spending plans due to high consumer prices, economists suggest that the Reserve Bank of Australia (RBA) may consider raising interest rates to control inflation.

In other news, Nvidia’s share price rallied after sliding for three consecutive days, that forced the tech giant to lose more than $500 billion in market capitalization.

Australian CPI May Figure Exceeds Forecasts

The Australian Bureau of Statistics (ABS) revealed early today that monthly CPI inflation hit 4.0% in May, on an annualised basis, exceeding economists’ expectations who had forecast that inflation would come in at 3.8%. This is the highest CPI inflation level recorded in 2024 while it was the third consecutive month that consumer prices have grown. 

Economists are now suggesting that the rising inflation trend may be reflected in the second quarter figures, pushing the RBA to raise interest rates. The Australian dollar gained ground against the US dollar on Wednesday morning as the probability of further monetary policy tightening has increased.

The RBA’s Assistant Governor, Christopher Kent, said elevated interest rates were contributing to slower growth of demand and lower inflation. Kent reiterated the central bank would take the time to assess the situation noting: “While recent economic data have been mixed, they have reinforced the need to remain vigilant to upside risks to inflation. Hence, with regards to the path of interest rates, the Reserve Bank Board is not ruling anything in or out.”

US GDP Q1 2024 Report

The US Bureau of Economic Analysis (BEA) will publish its first quarter GDP growth report on Thursday June 27th. Market analysts forecast the economic growth rate to come in at 1.3%, matching the previous quarter's figure. A stronger than anticipated GDP reading might indicate the economy's strength despite higher interest rates, making it harder for the Federal Reserve to adjust its monetary policy.

Commenting on the state of the US economy, a report published by Deloitte released on June 20th suggested that “real GDP growth slowed overall in the first quarter of 2024, coming in very close to our previous forecast’s expectations. We expect GDP growth will continue to moderate through the second half of this year and the start of the next, but the story is still positive overall.”

UK GDP Q1 2024 Report

The Office for National Statistics (ONS) is expected to release its UK GDP growth report for the first quarter of the year. According to analysts’ forecasts, the UK’s economy likely grew by 0.2% on yearly basis and by 0.6% on a quarterly basis, matching the figures recorded in the previous quarter. 

The UK economy has faced hardships in the last few quarters as high interest rates and inflation figures have hurt consumer budgets as well as business activity. With elections scheduled on July 4th, good news came from the inflation front last week as consumer prices growth matched the Bank of England (BoE) target for the first time in the last three years.

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