ASX 200 plunges as Aussie inflation data surprises to the upside

ASX 200 investors didn't like the latest inflation data just released by the ABS.

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The S&P/ASX 200 Index (ASX: XJO) just plunged 0.6%.

The ASX 200 was up 0.4% at 11:30am AEST. Then latest Consumer Price Index (CPI) data hit the wires. Five minutes later the benchmark index was down 0.2%, where it remains at the time of writing.

Here's why the monthly CPI data, reported by the Australian Bureau of Statistics (ABS), is spooking investors.

ASX 200 investors run for the woods on CPI data

The ASX 200 is giving back its morning gains and then some after news broke that inflation in Australia is proving stickier than most investors were hoping.

Fast-rising prices have led to a series of interest rate increases from the Reserve Bank of Australia (RBA) over the past year and a half. And with the inflation genie not yet securely back in its bottle, the odds of another RBA rate hike have just gone up.

Higher interest rates, as you're likely aware, tend to pressure most ASX 200 stocks. And newly appointed RBA chair Michele Bullock has made it clear the RBA won't hesitate to lift rates again to get inflation back to the bank's target range of 2% to 3%.

And it looks like we all have some way to go yet.

The ABS reported that CPI rose 1.2% in the September 2023 quarter and 5.4% annually. That's higher than consensus economist expectations of a 5.3% annual increase.

Commenting on Australia's inflation data, Michelle Marquardt, ABS head of prices statistics, noted the 1.2% increase in CPI in the September quarter was "higher than the 0.8% rise in the June 2023 quarter".

Marquardt added, "The rise this quarter, however, continued to be lower than those seen throughout 2022."

Inflation continued to drive the price of most goods and services higher over the quarter.

But Marquardt noted, "There were some offsetting falls this quarter including for childcare, vegetables, and domestic holiday travel and accommodation."

The biggest inflation drivers in the September quarter were automotive fuel (+7.2%), rents (+2.2%), new dwellings purchased by owner occupiers (+1.3%) and electricity (+4.2%).

While the latest 5.4% quarterly results are comfortably below the peak levels of 8.4% recorded in December, ASX 200 investors look to be bracing for another rate hike from the RBA on 7 November.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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