Data published by the Australian Bureau of Statistics (ABS) showed that consumer price growth accelerated to 1% QoQ in the 1st quarter from 0.6% QoQ in the 4th quarter. Economists had expected the CPI to rise by 0.8%. The most significant price rises this quarter were rents (+2.1%), secondary education (+6.1%), tertiary education (+6.5%) and medical and hospital services (+2.3%).
Year-on-year, consumer inflation fell to 3.6% (the lowest value since the 4th quarter of 2021) from 4.1% in the 4th quarter. Consensus estimates suggested that inflation slowed to 3.4%. The RBA's trimmed mean CPI increased by 4.0% per annum after an increase of 4.2% per annum in the 4th quarter. This was the weakest growth since the 1st quarter of 2022, but the index remained above the central bank's target range of 2-3%. Economists had expected an increase of 3.8% per annum.
The ABS said that in annual terms, goods inflation slowed to 3.1% from 3.8% in the 4th quarter, while services inflation grew by 4.3% after an increase of 4.6%. Weaker price growth was also recorded for food (3.8% vs. 4.5% in Q4), alcohol and tobacco (6.3% vs. 6.6%), housing (4.9% vs. 6.1%), healthcare (4.1% vs. 5.1%), transport (3.6% vs. 3.7%), communications (1.8% vs. 2.2%), recreation and culture (0.2% vs. 0.5%), insurance and financial services (8.2% vs. 8.1%). However, the cost of education rose by 5.2% after an increase of 4.7% in the 4th quarter. Clothing prices increased by 0.4%, partially offsetting a 1.1% drop in Q4.
Overall, the latest data sharply reduced the likelihood of easing the RBA's monetary policy this year (futures suggest a rate cut of only 8 basis points compared to 17 basis points before the data was published), and supported the Australian currency - the AUD/USD increased by 0.45%.