Inflation Cooled Slightly Before Iran War Impact

Inflation Cooled Slightly Before Iran War Impact

The Consumer Price Index (CPI) rose 3.7 per cent in February, marking a slight decrease from the previous month's 3.8 per cent. Housing, food, and non-alcoholic beverages were major contributors to price growth last month.

Underlying inflation, preferred by the Reserve Bank of Australia, remained steady at 3.3 per cent. However, the latest CPI figures do not capture the impact of rising energy prices caused by the US-Israeli war with Iran, which began on February 28.

Westpac Group chief economist Luci Ellis highlighted that while the headline CPI decreased, underlying inflation could still be affected by the conflict's developments. The Reserve Bank noted tight labor markets and capacity pressures as key factors in its recent monetary policy decision.

Treasurer Jim Chalmers emphasized that the conflict will likely worsen inflation for longer, despite temporary drops. Recent oil price spikes have raised inflation expectations, with markets showing cautious optimism about potential talks between the US and Iran to end the conflict.