Why did the ASX 200 just rebound following the hottest inflation print since 2023?

The S&P/ASX 200 Index (ASX: XJO) was down 0.4% at 8,673 points when the clock struck 11:30am AEST today.

In the minutes that followed, Australia’s benchmark stock market index rebounded to be down less than 0.2% at 8,696 points.

ASX 200 investors have been favouring their buy buttons following the release of the latest inflation data from the Australian Bureau of Statistics (ABS).

Here’s what we know.

Inflation not quite so hot as expected

ASX 200 investors appear relieved at the latest inflation print, despite the annual Consumer Price Index (CPI) running at two and a half year highs.

That’s likely because consensus economist forecasts had been expecting headline inflation for the 12 months to March to come in at a blistering 4.8%, while the ABS revealed price increases have been slightly below those expectations.

“March CPI inflation of 4.6% is up from the 3.7% annual inflation to February,” Sue-Ellen Luke, ABS head of prices statistics, said. “‘Annual CPI inflation is the highest it’s been since September 2023.”

A 6.5% increase in housing was the biggest driver of the annual inflation increase in March.

And, as you’ll know if you’ve stopped by the petrol station lately, Australia is feeling the price pain from the Middle East conflict.

According to the ABS:

The CPI monthly movement for March was 1.1 per cent, driven by transport which rose 9.2%, due primarily to a 32.8% monthly increase in automotive fuel prices.

Electricity costs also offered an unwelcome jolt. Electricity prices were up 25.4% year on year, largely due to the removal of Commonwealth and State government rebates that reduced electricity costs for households.

Trimmed mean annual inflation, which takes out certain volatile items like automotive fuel, was unchanged at 3.3% in the 12 months to March.

Why are ASX 200 investors celebrating the uplift in inflation?

While Australia’s inflation print is the highest in almost three years, the fact that it came in lower than most economists had been expecting looks to have lifted hopes that the Reserve Bank of Australia (RBA) may hold off on another interest rate hike.

The RBA meets again next Tuesday, 5 May, to announce its next interest rate decision.

Australia’s central bank has diverged from most leading global central banks on embarking on its tightening path this year to combat inflation, which was already back on the rise before the Middle East conflict put a rocket under energy prices.

After hiking interest rates by 0.25% at both of its 2026 meetings this year, Australia’s official cash rate currently stands at 4.10%.

Whether the slightly cooler-than-expected inflation print is enough to see the RBA keep rates on hold, as some ASX 200 investors appear to believe today, remains to be seen.

It’s important to remember that a lot of the price pressures we’re likely to see from the Iran war have yet to flow through to the broader economy.

Stay tuned!

The post Why did the ASX 200 just rebound following the hottest inflation print since 2023? appeared first on The Motley Fool Australia.

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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.