Australia's monthly consumer price index (CPI) registered no change in February compared with January, the Australian Bureau of Statistics reported on Wednesday. On an annual basis the headline CPI slowed to 3.7% from 3.8%, leaving inflation above the Reserve Bank of Australia's 2% to 3% target band.
Median market forecasts had anticipated a flat monthly reading and an annual rate of 3.8% for February. The Bureau's trimmed mean - a core inflation gauge - rose 0.2% over the month, below market expectations of a 0.3% gain, and held its annual pace steady at 3.3%. January’s trimmed mean annual rate was revised down to 3.3% from a prior 3.4%.
Russel Chesler, head of investments and capital markets at VanEck, said the February numbers showed inflation behaved in the month but stressed they have since been overtaken by global events. "With the outbreak of war in the Gulf, uncertainty and volatility are in the front seats, with higher energy costs likely flowing on to impact transport, goods and services," he said.
Market moves accompanied the release. The Australian dollar initially slipped on the data but later recovered to around 70 U.S. cents as global equity markets firmed. Three-year government bond futures extended earlier gains, rising 11 ticks to 95.34.
Investors remain uncertain about the RBA's next move. Following two rate increases so far this year, the cash rate stands at 4.1%, and markets view a potential May hike as a toss-up. Policymakers are now weighing that outlook against an oil-market shock linked to the U.S.-Israeli war on Iran, which has disrupted global oil trade and pushed domestic fuel prices higher.
Sector and item-level detail from the ABS showed automotive fuel prices fell 3.4% in February - a decline that occurred before the recent outbreak of war - following a 3.2% drop in January. Domestic holiday travel and accommodation costs declined sharply, down 7.4%, attributed to the end of school holidays.
On an annual basis, goods inflation ran at 3.5% in February, while services inflation eased modestly to 3.9%.
The CPI report provides a snapshot of price dynamics through February, but the balance of risks has shifted since the survey period, driven by higher energy prices and the potential pass-through to transport costs, goods and services across the economy.
Summary: Monthly CPI was flat in February; headline inflation dipped to 3.7% year-on-year. Core measures came in below forecasts, with the trimmed mean rising 0.2% for the month and holding at 3.3% annually. Market reaction was muted but asset moves reflected renewed concern about an oil-price shock tied to the U.S.-Israeli war on Iran.