Rate rise possible for next week

The Reserve Bank could raise rates sooner than previously expected as a result of higher than expected inflation figures released yesterday.

The Consumer Price Index jumped by 1.6 per cent in the first three months of the year, surpassing economists' expectations of a 1.2 per cent lift. The result means annual inflation is heading for 3.3 per cent – well above of the RBA's 2-3 per cent management bracket.

The headline inflation increase was driven by a 16 per cent rise in vegetable prices and 14.5 per cent lift in fruit prices as a result of the January floods and Cyclone Yasi.

Most economists expect the central bank to keep rates on hold at 4.75 per cent at its board meeting on Tuesday. However, Nomura chief economist Stephen Roberts said a pre-emptive rate rise was possible, especially as the domestic wage and labour markets tightened.

Source: The Australian