Australia CPI grows 3.4% in Feb, slightly below expectations

Investing.com-- Australian consumer price index inflation remained steady in February, slightly missing expectations and further factoring into a less hawkish outlook for the Reserve Bank of Australia. 

CPI inflation rose 3.4% year-on-year in Feb, data from the Australian Bureau of Statistics showed on Wednesday. The reading was slightly below expectations of 3.5% and remained steady from the prior month. 

Housing, food and alcohol prices were the biggest drivers of the headline CPI reading. 

Excluding volatile items such as fresh food, automotive fuel and holiday travel, underlying CPI inflation fell 3.9% in Feb, down from 4.1% in January. 

Inflation in Sydney and Melbourne was also boosted by performances by American pop singer Taylor Swift, which saw hotel prices rise in the two cities. But accommodation and airfare prices across the rest of Australia fell as travel demand petered out. 

Wednesday’s reading comes just a week after the RBA somewhat tempered its hawkish stance, in that the bank no longer explicitly stated it could raise interest rates further. 

But while Australian CPI inflation has fallen substantially from 30-year highs hit in early-2023, it still remains well above the RBA’s 2% to 3% annual target- a trend that is expected to keep the central bank from lowering interest rates in the near-term.

AUD falls, ASX 200 advances after CPI data

The Australian dollar fell slightly after the CPI data, with the AUDUSD pair down 0.1%. The reading presents a less hawkish outlook for the RBA, which diminishes the Aussie's prospects later this year.

But steady rates bode well for stock markets, with an eventual reduction in rates presenting more upside for Australian stocks. The ASX 200 index rose 0.2% after Wednesday's reading, and was now close to record highs hit earlier in March.