Team Veye May 27, 2026

Easing Fuel Prices Impact Inflation Favourably

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Australian inflation rose at a slower pace than expected in April because lower fuel prices eased cost pressures on households and businesses across the economy while data released by the Australian Bureau of Statistics on Wednesday showed that the monthly CPI increased 0.4% in April while annual inflation slowed to 4.2% from the previous 4.6%.

A major reason behind the softer headline inflation figure was a sharp 7% decline in automotive fuel prices after the Australian government reduced the fuel excise by half from April which came after a massive 32.8% rise in the prior month.

The report also stated that higher oil prices were still spreading through the wider economy especially in industries with heavy exposure to freight and logistics costs.

Postal service prices surged 12.4% while prices for new dwelling construction climbed 4.7% from a year earlier which showed that inflation pressures still exist across several sectors.

The trimmed mean measure of core inflation increased 0.3% during the month and lifted the annual core inflation rate to 3.4% which marked its highest level since late 2024 and is still above the Reserve Bank of Australia target range of 2% to 3%.

Investors also lowered expectations for another interest rate increase by the Reserve Bank of Australia in August as market implied odds fell to around 40% from 51%.

The central bank has already increased interest rates three times this year to 4.35% as policymakers attempt to control inflation and offset the effects of higher global energy prices.

Global central banks have maintained a hawkish position and the European Central Bank is expected to raise interest rates again next month.

Australia’s unemployment rate unexpectedly rose to a four-and-a-half-year high of 4.5% in April which may suggest that the labour market has started to weaken enough to reduce the need for much higher interest rates in the near term and the RBA will evaluate how global energy markets and geopolitical developments change over the coming months.

(Source: Reuters)

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