Australia inflation rises well above expectations in Q4

Australian annualized inflation rose to 7.8% in the fourth quarter of 2022, from 7.3% in Q3 and beating forecast for 7.5% increase, while quarterly inflation climbed to 1.9% in Q4 from 1.8% in Q3 and against forecasted drop to 1.6%.

The negative signal that inflation becomes entrenched gets confirmation from closely watched core inflation (Trimmed Mean), which climbed to 6.9% in Q4 from 6.1% in Q3 and strongly overshooting 6.5% consensus.

Consumer prices surged to the highest levels since 1990, driven mainly by strong rise in electricity and travel prices, which increased by 13% for domestic and 8% overseas, boosted by strong demand, particularly during the Christmas holidays.

Surprise figures sideline wide expectations that the worst has been seen and reviving hawkish stance that the Reserve Bank of Australia will continue raising interest rates in its next policy meeting in February and at least once more, due to rising inflationary pressures and may push the rate above projected peak at 3.6%.