Investing.com-- Australian consumer inflation fell more than expected in November, helped chiefly by a decline in fuel costs as oil prices fell, although core inflation remained elevated and well above the Reserve Bank of Australia’s annual target.

Consumer price index (CPI) inflation grew at an annualized 4.3% in November, data from the Australian Bureau of Statistics showed on Wednesday. The reading was slightly below expectations of 4.4%, and slowed from the 4.9% seen in October.

A sustained drop in fuel costs was the biggest driver of the softer headline CPI reading, as concerns over oil demand and a supply glut battered global crude prices in late-2023.

But housing and service cost inflation remained elevated, while electricity prices continued to trend higher despite government rebates. Food inflation also continued to grow.

Still, the headline CPI reading for November was its slowest pace of growth since January 2022.

Excluding volatile items such as fuel, fresh food and holiday travel, core CPI inflation grew 4.8% in November, compared to a 5.1% rise seen in October, the ABS reading showed. While the reading did ease in November, it still remained relatively sticky.

Wednesday’s data shows inflation moving further away from a 30-year peak hit at the beginning of 2023. But the reading still remained well above the RBA’s 2% to 3% annual target.

The central bank had hiked interest rates sharply over the past two years to combat overheated inflation in the wake of the COVID-19 pandemic. While it logged some progress on this front, RBA Governor Michele Bullock warned that price pressures were likely to remain sticky for longer.

CPI inflation is only expected to fall within the RBA’s target range by mid-to-late 2025.

The Australian dollar rose 0.2% after the reading, given that it fueled some bets that the RBA will keep rates higher for longer to combat sticky inflation. High inflation also brewed some uncertainty over the central bank’s plans for interest rates during an upcoming meeting in February.

Bullock has warned that interest rates could still increase further if inflationary pressures persist.

The mix of high inflation and interest rates have battered Australian consumers over the past year. But retail spending has remained steady, although its pace of growth largely stagnated through 2023.

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