ASX 200 jumps as inflation surprises to the downside

The S&P/ASX 200 Index (ASX: XJO) was up 1.7% at 11:30am AEDT.

Then the Australian Bureau of Statistics (ABS) released February's inflation data.

Over the following minutes, the ASX 200 marched higher to be up 2.1% at the time of writing as investors mulled over how the latest inflation print might impact the interest rate outlook from the Reserve Bank of Australia (RBA).

With inflation already ticking higher prior to the onset of the Iran war, the RBA opted to hike rates at both its meetings this year, bringing the official Aussie cash rate back up to 4.10%.

The RBA will announce its next rate decision on 5 May. Prior to the latest inflation data, markets were pricing in around a 70% chance that the central bank would lift rates again in May.

Here's how today's data might move those odds.

ASX 200 lifts on February inflation data

The ABS reported that the Consumer Price Index (CPI) increased by 3.7% in the 12 months to February 2026, down a tick from last month.

"The 3.7% annual CPI inflation to February eased slightly from the 3.8% annual CPI inflation to January," ABS head of prices statistics Sue-Ellen Luke said.

ASX 200 investors look to be taking the latest inflation data positively, with consensus estimates forecasting a 3.8% increase in inflation. Though today's print is still significantly outside of the RBA's 2% to 3% target range.

Driving the ongoing price increases, housing costs rose by 7.2% in the 12 months to February, while food and non-alcoholic beverage prices increased by 3.1%. Recreation and culture costs were up 4.1% over the year.

Trimmed mean inflation, which takes out certain volatile items like automotive fuel, came in at 3.3% for the 12 months to February, in line with the January print.

That also modestly beat consensus estimates of a 3.4% trimmed mean inflation print.

Now what?

While the slightly cooling inflation figures for February look to be boosting ASX 200 investor sentiment today, this data comes from before the onset of the Middle East conflict and the subsequent spike in global energy prices.

On 27 February, Brent crude oil was trading for US$72. Today, that same barrel is fetching US$98, up more than 36%.

So, we're not out of the inflationary woods just yet.

Commenting on Australia's inflation outlook, Josh Gilbert, market analyst at eToro, said:

With the February data unlikely to capture the full impact of the oil shock, the inflation story is only going to get more complicated from here. Petrol prices are climbing week on week, and those costs are flowing through to everything from groceries to transport. Treasurer Jim Chalmers has warned inflation could reach 5% this year.

With today's intraday gains factored in, the ASX 200 is up 7.7% since this time last year.