Inflation higher than expected after rising to 3.6 per cent, highest level since last year

Inflation has risen to its highest level in five months, likely pushing back any chance of an interest rate cut and possibly even opening up the potential for another rates increase.

The consumer price index for the 12 months to April was 3.6 per cent, according to the latest data from the Australian Bureau of Statistics, higher than market expectations of a fall to 3.4 per cent.

Monthly inflation had been sitting at 3.5 per cent for the 12 months to March, marginally lower than the 3.6 per cent quarterly figure.

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The last time it was higher than 3.6 per cent was in November, when the CPI indicator was 4.3 per cent.

"Annual inflation increased to 3.6 per cent this month, up from 3.5 per cent in March. Inflation has been relatively stable over the past five months, although this is the second month in a row where annual inflation has had a small increase," ABS head of prices statistics Michelle Marquardt said.

Housing costs were one of the key drivers in the higher-than-expected figures, rising almost 5 per cent over the last year, while rents soared by 7.5 per cent.

Food was also a major contributor, with fruit and vegetable prices rising by their highest amount since last April.

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Marquardt said when volatile prices like petrol and fresh food were overlooked, the CPI was steady.

"CPI inflation is often impacted by items with volatile price changes like automotive fuel, fruit and vegetables, and holiday travel," she said.

"It can be helpful to exclude these items from the headline CPI to provide a view of underlying inflation.

"When excluding these volatile items from the monthly CPI indicator, the annual rise to April was steady at 4.1 per cent.

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"Annual inflation excluding volatile items remains higher than for the monthly CPI indicator."

The Reserve Bank is due to hand down its next interest rate decision on June 18. While it typically places more importance on quarterly inflation figures, today's monthly data will likely have pushed back any chance of a rate cut.

After keeping rates on hold this month, Governor Michele Bullock warned the bank would increase the cash rate for a 14th time if inflation continued to come in above expectations.

"We don't think we necessarily have to tighten again," she said.

"But we can't rule it out. If we have to, we will.

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"If we really think that inflation is going to be persistent and significantly above our forecasts, we will tighten again."

The RBA had discussed increasing rates at its last meeting before opting to keep them steady.

In its statement on monetary policy, the RBA said it expected to be at 3.8 per cent for the June and December quarters – higher than both last month's quarterly data and today's monthly figures – before easing to 3.2 per cent midway through next year.