Australia Inflation Data Increases Rate Hike Expectations

This is a transcript of top stories presented by China's CCTV Business Channel as produced by CNBC Asia Pacific.

Hi, I'm Saijal Patel and you're watching "Asia Market Daily".

The Aussie dollar has soared to new 29-year highs - after first quarter inflation data came in higher than expected.

CPI rose 1.6 percent in Q1, the biggest increase in half a decade - on the back of higher food and fuel prices.

The result has increased expectations of another interest rate rise, with markets pricing in a 50-50 chance of an RBA hike by October.

But Luca Silipo of Natixis says he doesn't believe the Reserve Bank will move so soon.

(SOT) Luca Silipo, Chief Economist, Asia Pacific, Natixis:
The RBA is counting on the fact that the Australian dollar is so strong, to basically experience all the tightening in economic conditions that the Australian economy needs today. I don't see the need for the RBA to increase interest rates. The Australian dollar, as I said, can do all the tightening that the bank needs, and inflation is likely to subside on base effect in the rest of the year.

Meantime, Australian Treasurer Wayne Swan has played down the threat of rising prices, saying underlying inflation is still at the lowest level in 10 years, and is "under control".

Underlying CPI - which is what the RBA watches - has risen at an annual pace of 2.3 percent, well within the central bank's target band of between 2 and 3 percent.

That brings us to the end of "Asia Market Daily", I'm Saijal Patel from CNBC. Thanks for watching.

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