Australian consumer prices surged in the first quarter as war in the Middle East drove up energy costs, while core inflation stayed uncomfortably high for policymakers, keeping pressure on for a rate hike next week, reports Reuters.

The consumer price index (CPI) jumped 1.4 per cent in the first quarter, the sharpest rise since late 2023, data from the Australian Bureau of Statistics showed on Wednesday. Annual CPI inflation accelerated to 4.1pc in Q1, from 3.6pc.

The key trimmed mean measure of core inflation, which excludes the most volatile items like fuel, increased by 0.8pc in the quarter, just under forecasts of a 0.9pc gain. The annual pace picked up to 3.5pc, from 3.4pc, and further above the Reserve Bank of Australia (RBA) target band of 2pc to 3pc.

“Today’s CPI print, the first to partially reflect the Strait of Hormuz closure, points to a rate hike from the RBA next week,” said Stephen Smith, partner at Deloitte Access Economics.

“That rate hike is not guaranteed, but Australia’s starting point for inflation heading into this crisis likely leaves the central bank with little choice.”

Still, the lower-than-expected trimmed mean provided some relief as price pressures were not as bad as feared, traders said.

The Australian dollar slipped 0.2pc to $0.7170, while three-year government bond yields came off earlier one-month highs to be off 2 basis points at 4.70pc.