Investing.com-- Australian consumer price index inflation grew slightly less than expected in the fourth quarter, while underlying inflation also eased but still remained above the Reserve Bank of Australia’s target range.
CPI grew 2.4% year-on-year in Q4, its slowest pace since early 2021, data from the Australian Bureau of Statistics showed on Wednesday. The reading was just below expectations of 2.5% and eased from the 2.8% seen in the prior quarter.
CPI grew 0.2% quarter-on-quarter, slightly less than expectations of 0.3%.
Underlying inflation, as represented by annual trimmed mean CPI, grew 3.2% in Q4 against expectations of 3.3%. The reading still remained the RBA’s 2% to 3% annual target range.
The annual trimmed reading excludes the impact of electricity and fuel price changes- both of which have been a major drag on headline CPI inflation, amid support from government subsidies.
A separate monthly CPI reading read at 2.5% for December, in line with expectations but higher than November’s reading of 2.3%. The print indicated that inflation still picked up towards the end of the year, amid increased holiday spending.
Wednesday’s data showed that while government subsidies on electricity helped bring down overall inflation, stickiness in spending on recreational activities- such as holiday travel- still kept underlying inflation high. This trend has been largely driven by strength in Australia’s labor market, which has underpinned consumer spending.
The RBA- which will meet in mid-February- has so far given few cues on when it could begin cutting interest rates. The central bank signaled that rates will remain steady amid few signs of inflation falling into its target band.
The central bank only expects CPI inflation to fall sustainably within its target by 2026.