This morning, fresh insights from the Australian Bureau of Statistics revealed a significant jump in the consumer price index, which climbed 4.6 percent over the year ending in March. This marks an increase from the 3.7 percent rise observed in February.

Fuel costs have been a major contributor to this surge, with a staggering 32.8 percent rise in March—the highest monthly increase on record according to the ABS.

Despite these worrying figures, there is a glimmer of hope for borrowers concerned about potential interest rate hikes. The trimmed mean, which is the Reserve Bank of Australia’s (RBA) favored metric for assessing underlying inflation, held steady at 3.3 percent.

Before the release of this data, financial markets were already anticipating a strong likelihood—about 75 percent—of an interest rate increase during the RBA’s upcoming monetary policy board meeting. This expectation is shared by all of the country’s major banks, which are also forecasting a rate hike.

Charles Croucher, Political Editor for Nine, highlighted that transport costs have been a significant factor driving the unprecedented rise in monthly inflation.

“This surge originates at the fuel pump and exacerbates the inflation that was already beyond the RBA’s target range,” Croucher noted.

“We were already in a bad spot, this has just made it a whole lot worse.”

Croucher warned that yet another rate hike at the Reserve Bank’s May meeting is “almost inevitable”.

Oxford Economics Australia economist Harry McAuley agreed that unwelcome rate announcements are likely to be on the agenda next month.

He said oil price shocks are a central bank’s “worst nightmare” and that the RBA has a long road ahead to push the soaring inflation down.

“But the longer the Strait remains closed, the fewer options the board will have; a prolonged closure would force the RBA’s hand to hike rates multiple times this year to tame inflation and inflation expectations,” McAuley said.

Inflation will get worse: Chalmers

The inflation figure may increase even further before it drops again as the Iran war continues, Treasurer Jim Chalmers said.

Chalmers addressed the media following the announcement of a 4.6 per cent inflation and offered a grim prediction for the next few months.

“This war could drive inflation up even higher before it comes back down again,” he said.

“Treasury’s expectation is that inflation is likely to peak higher than this, but they are still finalising their forecasts ahead of the budget next month.”

But in a small triumph for the government’s fuel-saving measures, Chalmers said inflation would have been even higher if the excise had not been halved.

“For the next couple of months, our fuel excise cut has been a very important factor, taking some of the sting out of fuel prices, and that’s reflected in the movement in fuel prices,” he added.

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