The S&P/ASX 200 Index (ASX: XJO) salvaged some of its losses on news Australian inflation eased last quarter.
The index rebounded this afternoon to trade at 7,317.8 points at the time of writing, just 0.06% lower than it finished Monday's session. That's up from its intraday low of 7,285.3, which had marked a 0.5% fall.
Its recovery came as the Australian Bureau of Statistics (ABS) revealed the consumer price index (CPI) rose 7% over the 12 months to the March quarter. That marks a notable drop on the 30-year high of 7.8% reached in the December quarter.
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What did the ABS report?
Australia's CPI rose 1.4% in the March quarter, or 7% over the 12 months prior. That was the lowest quarterly rise since December 2021. Meanwhile, core inflation was 6.6%, down from 6.9% last quarter.
ABS head of prices statistics Michelle Marquardt commented on the latest CPI data, saying:
While prices continued to rise for most goods and services, many of these increases were smaller than they have been in recent quarters.
Annual inflation for goods of 7.6% was down from the 9.5% recorded in December, due to price falls for goods such as furniture, household appliances and clothing in the March quarter, as well as automotive fuel prices easing in recent quarters. However, annual inflation for services was 6.1%, up from 5.5% in the December quarter and is the highest since 2001.
What does easing inflation mean for the ASX 200?
As mentioned up top, the market has responded positively to the latest inflation figures.
That's likely due to the impact they might have on the Reserve Bank of Australia's (RBA's) next interest rate decision, to be made on Tuesday.
The RBA put forward ten consecutive rate hikes between May 2022 and March 2023 in an effort to combat rising inflation by tightening consumer spending. It paused its streak in April, to the relief of investors and borrowers alike. The cash rate currently sits at 3.6%.
While the inflation rate remains well above the RBA's target of 2% to 3%, the drop still brings hope the rate hiking cycle may have broken.
Betashares chief economist David Bassanese tweeted shortly after the latest CPI data dropped, saying:
[T]hat's good enough! No RBA rate hike next week, and still see no further hikes this year.
CreditorWatch chief economist Anneke Thompson, however, disagrees. She says inflation is "still showing cause for concern" and will likely result in another hike at Tuesday's RBA board meeting.
Speaking in Canberra, Treasurer Jim Chalmers commented that today's release shows "inflation has passed its peak and is now moderating," according to The Australian.
