Inflation eases to 4.2% but interest rate rise still on horizon, economists warn

Jim Chalmers has left open option to extend the 26-cent excise relief beyond its expiry at the end of June, as economist warn inflationary pressure continue to signal a further rate rise. Photograph: Darren England/AAP

Inflation slowed to 4.2% in the year to April as the government’s fuel excise relief fed through to lower petrol prices, even as economists warned the Reserve Bank may still need to hike interest rates later this year to tame stubborn inflationary pressures.

Fuel prices fell by 7% last month, retracing some of the 33% surge in March as the US-Israel attack on Iran closed a key Middle Eastern shipping route and triggered a global oil supply shock.