SYDNEY - A private-sector measure of Australian inflation climbed a sizable 0.5 per cent in March as petrol prices jumped, perhaps adding to pressure for another restraining rise in interest rates.
The TD Securities-Melbourne Institute Monthly Inflation Gauge was up 3.5 per cent on March last year, pickingup from 3.4 per cent in February and above the Reserve Bank of Australia's (RBA) 2 to 3 per cent target range.
"Inflation pressures remain acute," said Joshua Williamson, senior strategist at TD Securities. "Indeed, the monthly inflation result leads us to think the odds now favour the RBA hiking interest rates this week as it works to reign inflation back within the target range."
The central bank holds its monthly policy meeting on Tuesday and the market is pricing in around a 40 per cent chance of an increase in the 6.25 per cent cash rate.
Contributing most to the overall rise in the inflation gauge in March were rises in automotive fuel, alcohol and tobacco, and transportation. The price of petrol rose by 9 per cent during the month.
Price decreases in dwelling rents, after sharp rises in previous months, household contents and services, and books, newspapers and magazines partially offset these increases.
The TD-MI gauge showed core prices, excluding volatile fuel, fruit and vegetables, were unchanged in March. As a result core inflation for the year slowed to 3.3 per cent, after accelerating sharply in February to 3.5 per cent.
The trimmed mean of the TD-MI gauge, a statistical measure of underlying inflation, increased 0.3 per cent in March. Growth for the year climbed to 3.3 per cent, from 3.1 per cent in February.
The RBA focuses on its own trimmed mean measures of consumer price inflation to set monetary policy.
Based on the February inflation gauge, TD-MI forecast the official consumer price index (CPI), due out on April 24, would rise by 0.6 per cent in the first quarter.
The CPI fell by 0.1 per cent in the fourth quarter while underlying inflation rose by less than expected.
