ASX 200 rallies on latest Aussie inflation figures

ASX 200 investors are optimistic following the October CPI data just released by the ABS.

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The S&P/ASX 200 Index (ASX: XJO) just leapt 0.4%.

The ASX 200 was up 0.2% at 11:30am AEST, right before the latest Consumer Price Index (CPI) data was released.

In the minutes that followed, investors sent the ASX 200 sharply higher for an intraday gain of 0.6%.

Here's why the monthly CPI data for October, reported by the Australian Bureau of Statistics (ABS), is stirring bullish sentiment.

ASX 200 investors hitting the buy button on CPI data

The ASX 200 is moving higher following news that inflation in Australia increased by 4.9% in the 12 months to October 2023.

That's a significant decline from the 5.6% in September. And it's far below the 8.4% peak CPI levels reported in December. It's also likely helping boost the ASX 200 today, with the numbers coming below consensus expectations of 5.2%.

The biggest contributors to the ongoing price rises were housing, up 6.1%, food and non-alcoholic beverages, up 5.3%, and transport, which was up 5.9% over 12 months.

As for core inflation, acting ABS head of prices statistics Leigh Merrington said:

CPI inflation is often impacted by items with volatile price changes like automotive fuel, fruit and vegetables, and holiday travel. It can be helpful to exclude these items from the headline CPI to provide a view of underlying inflation.

Without these volatile items, the annual underlying inflation increase in October was 5.1%, down from the 5.5% annual increase in September.

Renters are also seeing some relief, though rents are still climbing due to low vacancy rates and a tight rental market. And much of the relief comes thanks to government intervention.

"The annual increase in rents is lower than the rise of 7.6% in September largely due to the increase in Commonwealth Rent Assistance that took effect from 20 September 2023 and reduces rents for eligible tenants," Merrington said.

He said that without the rental assistance boost, rents would have increased 8.3% in the 12 months to October, representing a bigger rise than September.

Now what?

While the ASX 200 is rallying on the latest inflation print, we're not necessarily out of the woods yet.

The RBA meets again next Tuesday, 5 December. Most economists expect the central bank will hold off on further rate hikes for now, keeping the official cash rate at 4.35%.

But with inflation still running far hotter than the RBA's 2% to 3% target range, ASX 200 investors shouldn't rule out the possibility of another interest rate increase in the first quarter of 2024. And it may be some time yet before we see that highly-anticipated first rate cut.

Stay tuned!

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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