The consumer price index moved up by 0.7% in April and the year-on-year inflation rate moved to 2.5% from 1.9% in March. Higher prices for food contributed to the inflation surprise along with the widely expected higher prices for fuel. Further, the delayed impact of the excise tax hike on tobacco products has continued but this year’s tax increase is only waiting to show up in the inflation figures. The increase in the cost of drugs after co-payments has also contributed to inflation.
Disregarding the influence of the excise tax hike and the changes to regulated prices, the April inflation rate was still relatively high and supports the expectation of an early hike in interest rates. The question now is: May or June?