Hopes of an interest rate cut have “slimmed” after data released on Wednesday revealed inflation was hotter than expected in the first quarter of 2024.

Price increases across rents, education and medical bills – and an uptick in services inflation – were the biggest contributors to inflation being higher than anticipated.

Quarterly inflation rose sharply, lifting 1 per cent from 0.6 per cent in the December quarter, the Australian Bureau of Statistics said on Wednesday.

It had been forecast to rise 0.8 per cent in the three months to March for an annual pace of 3.5 per cent.

Moody’s Analytics said the rising cost of services was the “main culprit” holding back progress towards lowering inflation in Australia.

“Insurance premiums jumped by their most in 23 years, rents grew at their fastest annual pace since 2009, and education fees saw their largest quarterly rise in 12 years,” it said.

“All in all it was a record-breaking month – for all the wrong reasons.

“Inflation will keep easing from here. But progress will be slow.”

The Reserve Bank of Australia wants inflation to ease as low as between 2 and 3 per cent.

But Moody’s said inflation would not reach the top of the RBA’s target until 2025.

Oxford Economics Australia head of macroeconomic forecasting Sean Langcake said the chances of an interest rate cut this year had “slimmed”.

But with the trimmed mean – the RBA’s preferred measure of underlying inflation – recording a modest drop to 4 per cent annually compared with the previous quarter of 4.2 per cent, Langcake said disinflation would be “frustratingly slow”.

“The chances of a cut in interest rates coming in 2024 have slimmed based on today’s data,” he said.

National Australia Bank and ANZ had already forecast a November start to rate cuts and planned to stick with their predictions.

Federal Treasurer Jim Chalmers said price pressures were lingering but called for perspective, with annual inflation tracking below Treasury’s forecasts in the mid-year budget update in December.

“People can get carried away, frankly, with the sorts of numbers that we’ve seen today,” he said on Wednesday.

Just weeks out from the May 14 budget, Chalmers said he was still shooting for a second surplus and that would put downward pressure on inflation.

Shadow treasurer Angus Taylor warned the government must keep budget spending restrained or risk driving up inflation and keeping interest rates high, putting more pressure on households.

He said the government’s Future Made in Australia industry policy, aimed to driving investment in low carbon industries, would put upwards pressure on inflation.

“That’s an exact replica of the bill in the United States that is driving inflation there and we’re seeing the same pattern here too,” Taylor said.

Fast-rising prices have been putting pressure on Australian households and prompted the RBA to embark on aggressive interest rate hikes starting in May 2022.

Prices that contributed the most to the quarterly inflation rise were across education (5.9 per cent), health (2.8 per cent), housing (0.7 per cent), and food and non-alcoholic beverages (0.9 per cent).

During the quarter, tertiary education rose 6.5 per cent as annual indexation was applied to fees.

Secondary education, as well as preschool and primary education, also rose in line with price increases typical of the new year, with the broader education recording its strongest quarterly rise since 2012.

Prices for medical and hospital services also typically go up at the beginning of the year as GPs and other health service providers review their fees. The category lifted 2.3 per cent during the quarter.

Rents were again a strong contributor to the quarterly lift in housing costs, up 2.1 per cent from a 0.9 per cent increase in the quarter before, reflecting record-low vacancy rates.

-with AAP