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Highlights

  • ASX 200 rises 0.9%, boosted by positive inflation data from the ABS.
  • Monthly CPI falls to 2.4%, in line with expectations and lower than previous months.
  • Market analysts expect a potential interest rate cut by the RBA in May.

The S&P/ASX 200 Index (ASX: XJO) rose by 0.9% shortly after 11:30am AEDT, benefiting from a boost in investor sentiment following the release of the latest Australian inflation data. The Consumer Price Index (CPI) for the 12 months to February 2025, published by the Australian Bureau of Statistics (ABS), showed a 2.4% increase. This was slightly lower than the 2.5% rise recorded in January and aligned with the expectations of analysts, including those from National Australia Bank (ASX: NAB), who had predicted a modest easing in inflation.

Key contributors to the inflation increase were food and non-alcoholic beverages, which rose by 3.1%, alcohol and tobacco, up by 6.7%, and housing, which climbed by 1.8%. However, underlying inflation, which excludes volatile items and is closely watched by the Reserve Bank of Australia (RBA), also showed signs of slowing. The annual trimmed mean inflation dropped slightly to 2.7%, down from 2.8% in January, providing further reassurance to investors.

With the latest inflation figures reinforcing a trend of easing price pressures, many market participants are now speculating that the RBA may opt for a rate cut in the coming months. The RBA's next meeting is scheduled for 1 April 2025, with many investors hoping for a reduction in interest rates to stimulate economic activity. Analysts, including Josh Gilbert of eToro, suggest that while the data may not prompt an immediate rate cut, it sets the stage for a potential decrease in May. The focus now shifts to the upcoming Q1 CPI data, expected at the end of April, which could further influence the RBA's policy decision.