Australia's February CPI cools slightly, but underlying inflation pressure persists

Investing.com - Data released by the Australian Bureau of Statistics on Wednesday shows that consumer inflation in Australia eased slightly in February, but underlying price pressures remain stubborn, supporting market expectations that the central bank will remain cautious in its policy stance.

Over the 12 months to February, the Consumer Price Index (CPI) rose by 3.7%, below January’s increase and the market forecast of 3.8%.

Quarterly, the CPI increased by 0.6% in the first quarter.

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The core inflation measure closely watched by policymakers indicates that price pressures persist.

The revised average CPI increased by 3.3% year-on-year in February, down slightly from 3.4% the previous month, while the weighted median indicator decreased slightly from 3.6% to around 3.5%.

Housing remains the largest driver of annual inflation, rising 7.2% for the year, mainly driven by higher electricity costs, rent increases, and rising new home prices. Electricity prices soared by 37% year-on-year, reflecting the impact of exhausted household government subsidies.

Food and non-alcoholic beverage prices rose 3.1% year-on-year, with significant increases in takeaway meals and red meat prices.

In contrast, transportation costs declined by 0.2% year-on-year, due to a 7.2% drop in fuel prices, despite recent geopolitical tensions casting a shadow over the outlook.

Australian Bureau of Statistics Price Statistics Manager Sue-Ellen Luke said that February’s annual inflation “eased slightly,” while underlying inflation remained stable.

These data reinforce market expectations that policymakers will maintain higher interest rates for a longer period to bring inflation back to target levels.

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