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Australian Inflation Below Expectations, Supports RBA Pause on Interest Rate Hikes

The Australian Bureau of Statistics reported on Tuesday that the country’s Consumer Price Index (CPI) increased less than expected in February. The February CPI rose 6.8% year on year, slower than January’s 7.4% and below the market’s anticipated 7.1% rise. The slowdown in holiday travel contributed to the lower-than-expected rise.

On a month-on-month basis, February’s CPI rose 0.2%, while core CPI excluding volatile food and energy rose 6.9% year-on-year, slowing from 7.5% in January. The lower-than-anticipated rise in inflation is expected to prompt the Reserve Bank of Australia (RBA) to halt its previously planned interest rate hikes at its meeting next month.

The RBA has already signaled it may not raise interest rates at its April monetary policy meeting so as to assess the impact of consecutive interest rate hikes in the past 10 meetings. This recent development in inflation is expected to reinforce the central bank’s decision. Whether the bank will increase interest rates at later meetings, however, remains to be seen.

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