By Stella Qiu and Wayne Cole

SYDNEY (Reuters) - Australian consumer inflation accelerated to a six-month high in May, while a key measure of core prices rose for a fourth month, figures that caught traders off-guard and prompted markets to raise the chances of another interest rate hike this year.

The Australian dollar climbed 0.4% to $0.6677 and the three-year bond futures tumbled 14 ticks to 95.97, their lowest level in three weeks.

Markets moved to imply a 50% chance of a quarter-point hike from the Reserve Bank of Australia by September, up from 12% before the data, with a move likely in August depending on the outcome of the full second-quarter CPI report.

Futures also priced out any chance of a cut in the 4.35% cash rate this year, and had only 17 basis points of easing implied by the end of 2025 compared to 44 basis points early in the day..

Data from the Australian Bureau of Statistics on Wednesday showed its monthly consumer price index (CPI) rose at an annual pace of 4.0% in May, up from 3.6% in April and well above market forecasts of 3.8%.

The CPI dipped 0.1% in May from April.

A closely watched measure of core inflation, the trimmed mean, climbed to an annual 4.4%, also its highest level in six months and up from 4.1%.

"Australia could be one of the very few developed markets to raise rates," said Russel Chesler, VanEck Head of Investments & Capital Markets.

"Forget ‘higher for longer’ – we may end up being the ‘highest for the longest’."

With inflation still running above its target band of 2-3%, the RBA has warned it is alert to upside risks. It has held interest rates steady at a 12-year high of 4.35% for five straight meetings.

The central bank will have the luxury of waiting for the quarterly report due at the end of July to decide on its next policy move. But hot readings for April and May suggest the second quarter inflation data could be as strong or stronger than the first quarter report, putting pressure on the RBA to hike in August.

Tapas Strickland, head of market economics at NAB, noted that travel costs in May did not fall as much as analysts were expecting and service prices for telecom and insurance were high.

Indeed, when volatile items and holiday travel were excluded, the CPI dipped to 4.0%, from 4.1%.

"If that quarterly inflation report does print say 1% q/q or a bit higher, then I think it's going to be very hard for the RBA to be on hold," said Strickland. "We're not there in terms of calling (a rate hike), but that risk is clearly growing."

The report showed electricity prices jumped by an annual rate of 6.5%, picking up from April's 4.2% rise, due to the unwinding of government rebates, although they are set to ease from the third quarter as new cost of living relief from the federal and state governments kicks in.

Rent surged 7.4% while insurance costs jumped 14%.

The May report, which provided an update on more services in the second quarter of the year, showed prices for haircuts, restaurant meals and takeaway food were up 5.5%, 4.2% and 4.3% annually.

"We’re still of the view that it’s more time not more hikes that’s needed to quash inflation. But we’re getting a little less steadfast in that conviction," said Harry Murphy Cruise, an economist at Moody’s Analytics.

"An August hike now can’t be ruled out."

By Tom Westbrook

SINGAPORE (Reuters) -The dollar was firm on Wednesday and trading on the precipice of the 160 yen barrier as investors turned cautious and counted down to the release of U.S. price data at the end of the week.

A jump in Australian inflation to a six-month high sent the Aussie dollar up 0.3% to $0.6667 in otherwise subdued markets as traders started to price a 30% risk of a Reserve Bank of Australia (RBA) rate hike as soon as August.

"The RBA's next board meeting on August 6th is now 'live,'" said Tony Sycamore at brokerage IG Markets.

A similar surprise in Canadian inflation had sent the Canadian dollar briefly spiking to a three-week high.

Elsewhere the euro was steady at $1.0714 in Asia and at 159.78 per dollar, the yen's level has markets on alert for intervention since that is only a whisker shy of where Japanese authorities likely stepped in to buy yen in April.

Markets are banking that Friday's U.S. data shows annual growth in the Federal Reserve's favoured core personal consumption expenditure index slowed to 2.6% in May, the lowest in more than three years and opening the way to rate cuts.

Policymakers, however, continue to signal they are in no rush, with Fed Governors Lisa Cook and particularly Michelle Bowman stressing that decisions will depend on data.

"Inflation in the U.S. remains elevated, and I still see a number of upside inflation risks that affect my outlook," Bowman said.

The Australian dollar dipped 0.1% to $0.6640 and the New Zealand dollar similarly slipped to $0.6115, with small moves reflecting thin trade.

Citi said this week that its etraders found interbank FX volumes some 40% lower than thirty-day averages.

Sterling was steady at $1.268, while bitcoin has recovered somewhat from a dip below $60,000 this week to trade at $61,668.

Along with the yen, China's yuan is also getting squeezed by the dollar's stubborn strength. China has seemed to signal some tolerance for a cheaper currency by gradually weakening the midpoint of the yuan's daily trading range on the dollar.

The yuan has hugged the low side of its band for months and was last at 7.2884 per dollar in offshore trade.

"The yen moves more, and yuan moves are more controlled, but they seldom move in opposite directions," said Societe Generale (OTC:SCGLY) strategist Kit Juckes.

"If USD/JPY does break through 160 in the coming days, preventing further yuan weakness would be very difficult indeed."

SYDNEY (Reuters) - Australia's central bank said on Wednesday that monetary policy was restrictive with the current cash rate causing financial pain for many households, but it could not rule out further tightening if necessary to tame inflation.

In a speech on the banking industry in Melbourne, Reserve Bank of Australia (RBA) Assistant Governor Christopher Kent said interest rates of 4.35% were contributing to slower growth of demand and lower inflation.

"We know that many are feeling a painful squeeze on their finances because of higher interest rates," said Kent, noting mortgage payment has already increased to a record 10% of household disposable income.

Kent said rates were clearly above all estimates of the neutral rate - that which neither stimulates nor retards economic growth.

The RBA has raised interest rates by a whopping 425 basis points since May 2022, but has held steady for five straight meetings with inflation running at 3.6%, well above its target band of 2-3%.

RBA Governor Michele Bullock earlier this month told reporters that the restrictive policy is one reason that the policymakers were reluctant to raise rates further at its June policy meeting.

Markets see only a modest chance of a rate cut until April next year, and just 43 basis points of easing has been priced in by the end of 2025.

Kent reiterated the central bank was in no rush to ease.

"While recent economic data have been mixed, they have reinforced the need to remain vigilant to upside risks to inflation," he reiterated.

(Reuters) - Uncertainty looms over the U.S. auto industry, fueled by expectations that the presidential elections in November will reshape the economy, affect interest rates or influence inflation levels, a report from Cox Automotive showed on Tuesday.

Cox forecast that new-vehicles sales volume in the first half of 2024 will rise by 2.9% year-over-year and held its full-year forecast steady at 15.7 million.

WHY IT'S IMPORTANT

Consumers in the U.S. have been reluctant to make big-ticket purchases like vehicles due to inflationary pressures. Shoppers may continue to hold back due to economic uncertainty stemming from the presidential election, the report says.

KEY QUOTES

"If shoppers believe interest rates will be lower in the future, or that the economy will be improving – or worsening – post-election, they are more likely to stay on the sidelines, waiting for the dust to settle," said Vanessa Ton, senior manager at Cox Automotive.

"There is a view from consumers now that if they wait, they're going to get a better price," Charlie Chesbrough, senior economist for Cox Automotive, said in a media briefing on Tuesday.

BY THE NUMBERSBoth shoppers and dealers believe that inflation is the top concern, with 74% of consumers and 81% of dealers believing the next election will influence it.

However, auto dealers are divided on the impact of the election on vehicle sales, with about 38% expecting sales to worsen, and 31% each who expect sales will either improve or remain the same.

WHAT'S NEXT

About 41% consumers believe that vehicle prices will rise due to the election, while 33% believe it will have no impact on prices, according to the report.

MUMBAI/BENGALURU (Reuters) -India's worsening water shortage, triggered by high consumption amid rapid economic growth and frequent natural disasters, can negatively impact the South Asian nation's sovereign credit strength, Moody's (NYSE:MCO) Ratings said on Tuesday.

Millions of Indians face water shortages every summer when water demand rises in farms, offices and homes against a limited supply, but a prolonged heatwave this year has worsened the shortfall, including in Delhi and the southern tech hub of Bengaluru.

"This is detrimental to the credit health of the sovereign, as well as sectors that heavily consume water, such as coal power generators and steel-makers," Moody's Ratings said in a note.

"In the long term, investment in water management can mitigate risks from potential water shortages," it added.

India's average annual water availability per capita is likely to drop to 1,367 cubic meters by 2031 from an already-low 1,486 cubic meters in 2021, according to the Ministry of Water Resources.

A level below 1,700 cubic meters indicates water stress, with 1,000 cubic meters being the threshold for water scarcity, according to the ministry.

"Decreases in water supply can disrupt agricultural production and industrial operations, resulting in inflation in food prices and declines in income for affected businesses and communities, while sparking social unrest," Moody's said.

This, in turn, can exacerbate volatility in India's growth, it warned.

Increases in the frequency of water shortage, severity or durations of extreme climate events stemming from climate change will exacerbate the situation because India heavily relies on monsoon rainfall for water supply, the global agency said.

Industrialisation and urbanisation will intensify competition for water among businesses and residents, it added.

The sustainable finance market in India can provide companies and regional governments with a critical avenue to raise funds, it said. Moody's currently has a Baa3 rating on India with a stable outlook.

By Ellen Zhang and Joe Cash

DALIAN, China (Reuters) -China's Premier Li Qiang used his address at a World Economic Forum meeting in Dalian to hit back at accusations from the U.S. and EU that Chinese firms benefit from unfair subsidies and are poised to flood their markets with cheap green technologies.

Li's comments come as China and the European Union prepare to host technical talks on the planned imposition of tariffs on Chinese-made electric vehicles (EVs) imported into the 27-strong bloc and after the United States unveiled steep tariff hikes on an array of Chinese imports, including EV batteries, in May.

"China's production of advanced electric vehicles, lithium-ion batteries and photovoltaic products, etcetera, first met our domestic demand, but also enrich global supply," Li said in opening remarks in the northeastern Chinese city on Tuesday.

"The rapid rise of China's new industries is rooted in our own unique comparative advantages," Li added.

Brussels' trade policy has turned increasingly protective and aligned with that of Washington over concerns China's production-focused development model could see it flooded with cheap goods as Chinese firms look to step up exports amid weak domestic demand.

Beijing has warned Brussels it risks opening up a new front in the West's trade war with Beijing - which began with Washington's initial import tariffs in 2018 - and opened an anti-dumping probe into EU pork imports following the EU's tariff decision.

"The continuous emergence of economies of scale can effectively dilute enterprises' innovation costs... which is the real source of the strong competitiveness of China's new industries," Li said.

China maintains it simply decided to invest in green technologies earlier, and that the West's actions are unjustified.

"China's really made headway into producing these cars at low cost... so it is a lesson for us to try to get our act together and be better at it," said Benoit Boulet, professor of electrical and computer engineering at McGill University, on the summit's sidelines.

"It's seen as a threat at the very beginning, but then eventually Chinese cars will come to North America."

China and Chinese analysts have consistently rejected accusations it has an over-capacity problem or that its firms benefit from unfair subsidies, asserting that as the $18.6 trillion economy recovers, supply will better meet demand.

Li told delegates "the rapid growth of new industries and new driving forces has strongly supported and sustained the healthy development of China's economy."

"Since the beginning of this year, China's economy has maintained an upward trend... and is expected to continue to improve steadily over the second quarter," Li said.

"We are confident and capable of achieving the full-year economic growth target of around 5%," he added.

By Nate Raymond

(Reuters) -Two federal judges in Kansas and Missouri on Monday at the urging of several Republican-led states blocked President Joe Biden's administration from further implementing a new student debt relief plan that lowers payments.

U.S. District Judge Daniel Crabtree in Wichita, Kansas, blocked the U.S. Department of Education from implementing parts of a student loan repayment plan not already in effect that cuts borrowers' monthly payments and provides a faster path to have debts forgiven.

He ruled shortly before U.S. District Judge John Ross in St. Louis, Missouri, issued a preliminary injunction barring the department from granting further loan forgiveness under the administration's Saving on a Valuable Education (SAVE) Plan.

The SAVE plan provides more generous terms than past income-based repayment plans, lowering monthly payments for eligible borrowers and allowing those whose original principal balances were $12,000 or less to have their debt forgiven after 10 years.

Missouri Attorney General Andrew Bailey, a Republican who helped lead the litigation, hailed Ross' decision. "Congress never gave Biden the authority to saddle working Americans with half-a-trillion dollars in other people's debt," he wrote on social media platform X.

The White House said it strongly disagreed with the rulings and criticized Republican elected officials who have fought against student debt forgiveness.

"Today's rulings won't stop our administration from using every tool available to give students and borrowers the relief they need," White House Press Secretary Karine Jean-Pierre said in a statement.

Biden, a Democrat, announced the SAVE Plan in 2022, alongside a broader $430 billion program that would have fulfilled a campaign promise by cancelling up to $20,000 in debt for up to 43 million Americans. It was ultimately blocked by the conservative- majority U.S. Supreme Court in June 2023.

The SAVE Plan was slated to fully take effect on July 1, though parts of it already been implemented, with 414,000 borrowers by mid-May having been granted $5.5 billion in debt relief, according to the Education Department.

The White House has said that over 20 million borrowers could benefit from the SAVE Plan. The administration in May said that 8 million are already enrolled, including 4.6 million whose monthly payments have been reduced to $0.

Eleven states challenged the plan in a lawsuit in Kansas. Crabtree had recently dismissed eight of the states' claims, but allowed South Carolina, Texas and Alaska to push forward. Seven other states sued in Missouri.

Neither judge on Monday ordered any debt relief already granted unwound. Crabtree said the Republican-led states waited too long to sue to claim they were being irreparably harmed by the in-effect aspects of the SAVE Plan.

But Crabtree, who like Ross was appointed by Democratic former President Barack Obama, said the Higher Education Act of 1965 did not clearly authorize the type of "unprecedented and dramatic expansion" of income-based repayment plans envisioned.

He cited an estimate by lawyers for the Republican-led states of South Carolina, Texas and Alaska that the SAVE Plan would carry a price tag of $475 billion over 10 years.

Ross, ruling in favor of seven states led by Missouri, reached a similar conclusion in finding the department "overstepped its authority by promulgating a loan forgiveness provision as part of the SAVE program."

WASHINGTON (Reuters) - The International Monetary Fund said on Monday its Executive Board has concluded a second review of Bangladesh's bailout program, giving the country immediate access to about $928 million in loans for economic support and about $220 million to combat climate change.

"Bangladesh’s economy is navigating multiple macroeconomic challenges," IMF Deputy Managing Director Antoinette Sayeh said in a statement.

"Even in the difficult environment, program performance has been broadly on track and the authorities remain committed to undertaking the necessary policy actions and reforms," she said.

Bangladesh's $4.7 billion bailout was approved by the fund's Executive Board in January 2023.

The board's first review of the bailout plan was cleared in December and gave Bangladesh immediate access to about $468.3 million for its economy and about $221.5 million in support of its climate change agenda.

By David Shepardson

WASHINGTON (Reuters) - The U.S. Transportation Security Administration said it had screened 2.99 million airline passengers on Sunday, the highest-ever number in a single day.

The agency said on Monday it expects to screen more than 32 million travelers during the 2024 Independence Day travel period that runs from Thursday through July 8, which is 5.4% higher than 2023 levels.

The TSA said it expects on Friday it will for the first time screen more than 3 million people, the busiest day expected during the upcoming holiday period. Sunday's record broke the prior high of 2.95 million set in late May, while seven of the 10 busiest travel days ever have occurred over the past month.

A group representing major U.S. airlines forecast record summer travel with airlines expected to transport 271 million passengers, up 6.3% from last year.

Industry group Airlines for America said U.S carriers plan to fly more than 26,000 daily flights this summer, up nearly 1,400 or 5.6% over 2023, when they carried 255 million passengers. The summer travel season forecast is for June 1 to Aug. 31.

The forecast comes as the Federal Aviation Administration is struggling to address a persistent shortage of air traffic controllers. Some airlines voluntarily trimmed New York flights last summer to address congestion issues and have raised new concerns about the lack of controllers.

The FAA said on June 5 it would again extend cuts to minimum flight requirements at congested New York City-area airports through October 2025, citing shortages of air traffic control staff.

The FAA said the number of controllers handling traffic in New York is insufficient for normal traffic levels and that without "increased flexibility," congestion, delays, and cancellations are likely at JFK, LaGuardia and Newark airports.

Under minimum flight requirements, airlines can lose their takeoff and landing slots at congested airports if they do not use them at least 80% of the time. The FAA's waiver allows airlines to fly fewer flights and still retain slots.

(Reuters) - London's FTSE 100 was flat on Monday as investors turned cautious ahead of key inflation data in the United States, while a downtick in oil and copper prices weighed.

The blue-chip FTSE 100 was unchanged after touching a two-week high on Friday, while the mid-cap FTSE 250 was off 0.1% at 0709 GMT.

The energy sector fell 0.3%, in tandem with oil prices, as concerns of higher-for-longer interest rates in the U.S. strengthened the dollar. [O/R]

Industrial miners slipped 0.7%, as concerns of muted Chinese demand kept traders on the sidelines, pulling down copper prices. [MET/L]

The Bank of England (BoE) kept interest rates unchanged on Thursday, with renewed hopes of an August rate cut after comments from policymakers.

A domestic inflation report last week showed that headline inflation in the economy had fallen to 2% - the BoE's target.

In the U.S., the personal consumption expenditure numbers (PCE) are due on Friday. Investors are banking on the data to show a renewed moderation in inflation.

Also due are the gross domestic product numbers in the UK, that will shed more light on the state of the British economy, after strong retail sales data on Friday tempered some optimism from the BoE's comments.

Prudential gained 4.6% after the insurance group said it planned a $2 billion share buyback programme, to be completed by mid-2026.

Shares of HG Group gained 4.7% after the ecommerce company agreed to sell its portfolio of luxury goods website to Fraser's Group for an undisclosed sum. Fraser's Group was up 0.9%.