The monthly TD Securities-Melbourne Institute Inflation Gauge shows prices rose by 0.5 per cent in March, driven by rising costs for travel, accommodation, alcohol, tobacco and petrol, which rose 3.5 per cent. Prices fell for meat and seafood, housing and clothes and shoes, the gauge showed.
Despite the strong growth in the month, the annual rate of inflation was just 1.8 per cent for the year to March, its lowest in two years.
Underlying inflation - the Reserve Bank's preferred measure of consumer prices - rose 0.3 per cent in the month for an annual rate of 1.9 per cent, which is below the central bank's target of 2 to 3 per cent.
The RBA holds its next monthly board meeting tomorrow and is expected to leave the official cash rate unchanged at 4.25 per cent despite the consumer price figures.
TD Securities head of Asia-Pacific research Annette Beacher says while she expects the central bank to ease interest rates by up to 50 basis points in the coming months, it is unlikely to take action tomorrow.
"While expectations for a near-term rate cut have been re-ignited, we cannot identify clear triggers for the RBA to recommend a rate cut tomorrow, as lower inflation, lingering global risks and contractionary fiscal policy are slow burn issues, not smoking guns," Ms Beacher said in a statement.
"We expect the RBA to remain relaxed and comfortable, as neutral monetary policy is consistent with the bank's forecasts for trend growth and trend inflation over the medium term."
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