Money markets have doubled down on bets that the RBA will follow suit in May, amid expectations that inflation will rise as the war drags on.
The central bank will closely monitor inflation data for February, which will be published by the Australian Bureau of Statistics on Wednesday.
Commonwealth Bank Chief Economist Belinda Allen said the release would provide the final information on how prices were tracking before the crisis.
He expects annual inflation to drop from 3.8 percent to 3.7 percent, due to a 2.8 percent decrease in the cost of fuel.
As the view of gasoline prices approaching $3 per liter shows, it is the calm before the storm.
The February reference period for ABS predates the recent price hike, which is expected to rise more than 25 percent through March, said NAB chief economist Taylor Nugent.
“In general, the cost shock from the Middle East will be seen first and most clearly through the price of motor oil, which will increase by almost one percent to the March CPI, sending the rate to the end of the year to about 4.6 percent,” he said.
Higher air fares will pass from April for domestic flights and May for international flights, while higher costs passed through other industries such as transportation, logistics, agriculture, packaging, manufacturing and construction will be evident in the coming months, he said.
None of this will be reflected in Wednesday’s data.
But luckily for the RBA, March inflation data is due before its next meeting in May and will provide a clearer picture of the post-war economic outlook.
The increase in fuel costs will not be reflected in the RBA’s quarterly average inflation measure, which leaves the commodity volatile.
Because the price increase came at the end of the quarter, most of the impact will only be felt in the June quarter, where NAB is currently forecasting inflation rising by 5 percent, Nugent said.
AAP
