Australia's inflation jumps to 6-month high in May

Australia'sinflation accelerated to a six-month high in May. This has got markets predicting another interest rate hike this year, as a key measure of core prices also rose for the fourth consecutive month.

This comes as the Australian dollar climbed 0.5 per cent while three-year bond futures tumbled to their lowest level in three weeks.

This also delays the possibility of monetary easing until late 2025. The monthly consumer price index rose at an annual pace of 4 per cent, well above market forecasts. UBS & Deutsche Bank predict a rate hike in August, while the National Australia Bank delayed the call for first easing to May 2025.

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Hike in August?

The Reserve Bank of Australia has warned of upside risks as inflation runs above the target bank of 2-3 per cent. It has held interest rates on hold at a 12-year high of 4.35 per cent. The central bank is waiting for the quarterly report due at the end of July.

Electricity prices have jumped by an annual rate of 6.5 per cent, up from 4.2 per cent in April. These prices are expected to ease from the third quarter as cost of living relief kicks in. Rent surged 7.4 per cent and insurance costs jumped 14 per cent.