While Wall Street hit new record highs overnight, the local market traded sideways throughout the day on Wednesday before closing 0.25% lower.
The materials sector rose by 2.7%, led by solid performances from heavyweights BHP (ASX:BHP) Group, Fortescue (ASX:FMG) and Rio Tinto (ASX:RIO), which each gained more than 3.5%.
That followed news of China’s housing rescue package to support the country’s economic growth, which has reversed analyst expectations on iron ore demand.
The worst performing sector today was Financials, down 1.7% as the banks recorded their weakest day in weeks. Notably, Macquarie Group was slapped with $4.9 million in fines over failures to prevent energy market manipulation.
Monthly inflation figures
The Australian Bureau of Statistics (ABS) revealed today that Australia's inflation rate fell to its lowest level in three years in August, largely due to government energy rebates.
The ABS reported annual headline inflation at 2.7% for August, down from 3.5% in July and within the RBA’s target range of 2% to 3% for the first time since October 2021.
However, the RBA’s preferred inflation measure — trimmed mean inflation, which excludes volatile price movements — remained at 3.4% over the year to August, down from 3.8% in July.
Energy rebates were the primary driver behind the inflation drop, with households across Australia receiving a A$75 rebate in August, leading to a 17.9% reduction in electricity prices. A 2% decrease in petrol prices also contributed to the lower inflation figure.
Commenting on what the figures mean for the RBA, Betashares (ASX:BBUS) chief economist David Bassanese noted underlying inflation was less than the 3.5% forecast by the RBA for the December quarter.
He said: “If annual trimmed mean inflation does not once again lurch higher, but continues its recent trajectory lower, there is a growing chance it could reach the mid-point of the RBA’s 2-3% target band by year-end, which would be significantly better than current RBA forecasts.
"If so, there would be a good chance the RBA could cut interest rates before Christmas.”
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