The Reserve Bank of Australia – which is nine days away from its next interest rate decision – has been eyeballing the consumer price index for signs of any slowing in upward pressures on prices as it considers whether to hike again.
The May index, to be released by the Australian Bureau of Statistics on Wednesday, will provide the next up-to-date assessment of Australia’s inflationary environment.
In April, annual inflation grew by a stronger-than-expected 6.8 per cent, up from 6.3 per cent in the year ended March.
While a halving of the fuel excise partly explained the jump in April, an unexpected lift in the holiday travel and accommodation category also contributed to the strong result.
Westpac economists are forecasting 6.1 per cent annual growth in May, or 0.1 per cent over the month, driven by higher prices for food, clothing, housing and furnishings.
They also anticipate falls in transport and holiday travel over the month.
As well as the monthly CPI, the RBA is likely to study the May retail trade data from the bureau on Thursday for insights into consumer spending patterns.
Retail sales have plateaued over the past few months as cost of living pressures and high interest rates take a toll on household finances.
The central bank will be looking for signs its interest rate hikes are taking some demand out of the economy – as intended – so it can ease off the accelerator on rates.
The RBA, which has been steadily lifting rates in each month bar one since May 2021, next meets on July 4. The cash rate currently stands at 4.10 per cent.
Other notable economic data due this week include the Australian Chamber of Commerce and Industry and Westpac business survey, due on Tuesday, and the central bank’s own data on private sector lending for May on Friday.
Meanwhile, the Australian stock market is expected to open lower on Monday after Wall Street slumped on Friday amid concern the US Federal Reserve will raise interest rates again at its next meeting in July.
The US Dow Jones Industrial Average fell 219.28 points, or 0.65 per cent, to 33,727.43, the S&P 500 lost 33.56 points, or 0.77 per cent, at 4,348.33 and the Nasdaq Composite dropped 138.09 points, or 1.01 per cent, to 13,492.52.
The most traded Australian share price index futures contract shed 16 points to 12820 points in weekend trading, pointing to a softer start to the week for the local bourse.
On Friday, the benchmark S&P/ASX200 finished down 96.3 points, or 1.34 per cent, to 7,099.2, while the broader All Ordinaries retreated 95.4 points, or 1.29 per cent, to 7,285.6.