Australia’s inflation data for February showed modest cooling, though underlying pressures remain firm. Headline CPI was flat at 0.0% mom, below expectations of 0.1% mom, while annual inflation ticked down from 3.8% yoy to 3.7% yoy. The figures suggest that inflation is, at least, no longer accelerating, offering some relief for RBA policymakers.
However, core measures paint a more persistent picture. Trimmed mean CPI rose 0.2% mom, with the annual rate holding at 3.3% yoy for a third consecutive month. This stability in core inflation indicates that underlying price pressures are not easing meaningfully, despite the slight dip in headline numbers.
The composition of inflation also highlights ongoing concerns. Services inflation remained elevated at 3.9% yoy, outpacing goods inflation, which slowed from 3.8% yoy to 3.5% yoy. Key contributors included housing, food, and recreation, underscoring that domestic price pressures, particularly in services, remain entrenched.
Crucially, these readings predate the latest surge in energy prices driven by geopolitical tensions. As higher fuel costs begin to feed through to transport and broader goods and services, inflation risks are likely to tilt higher again. This leaves the RBA facing a more uncertain outlook, with policy decisions increasingly complicated by the evolving external environment.
