Inflation climbs 1.6% in March quarter

Inflation has climbed above expectations, with Australia’s consumer price index up 1.6% during the March quarter.

The increase was higher than the 1.2% rise predicted by analysts and meant that core inflation was up by 0.9%.

The sharpest price rises were in the food category, which rose 2.9% overall. Vegetables rose 16% in price, with fruit up 14.5%. This was mainly driven by the impact of floods and Cyclone Yasi in Queensland.

Elsewhere, transport costs rose 2.7%, with fuel up 8.8%, and financial and insurance services prices jumped by 2.6%.

Alcohol and tobacco prices were also up, although there were slight drops in the price of recreation and clothing and footwear sectors.

On an annual basis the consumer price index increased by 3.3%. The rise is expected to lead to an interest rate hike, although many analysts don’t expect this to happen until later on this year.

The CPI increase immediately sent the Australian dollar to a new post-float high of 108.44 US cents.

Bank of New Zealand currency strategist Mike Jones said the Australian dollar remains the darling of the currency markets, boosted by a “buoyant” global risk appetite and expectations the US dollar will remain weak, AAP reports.

“Certainly, the commodities backdrop is still very strong. Gold and silver prices are making record highs on an almost daily basis and industrial metal prices are still very strong,” he said.