WHY A 2022 INTEREST RATE HIKE JUST BECAME MORE LIKELY

The Reserve Bank of Australia’s inflation forecasts have been blown out of the water as supply chain disruptions and petrol prices push up the cost of living.  Economists say key data released Tuesday may force the RBA’s hand to raise interest rates this year, despite governor Philip Lowe repeatedly dismissing speculation of a 2022 hike.

The Consumer Price Index (CPI) rose a stronger-than-expected 1.3% in the December quarter, according to the Australian Bureau of Statistics, pushing the annual rate up to 3.5%.

Michelle Marquardt, head of prices statistics at the ABS said global supply chain disruptions and material shortages, combined with rising freight and fuel costs had driven up prices. “Shortages of building supplies and labour, combined with continued strong demand for new dwellings, contributed to price increases for newly built houses, townhouses and apartments.” Ms Marquardt said. “Fuel prices rose again in the December quarter, resulting in a record level for the CPI’s automotive fuel series for the second consecutive quarter.”

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