SYDNEY - Australia's consumer price index (CPI) rose 0.2% in the December quarter, below market expectations, data from the Australian Bureau of Statistics showed on Tuesday. The annual rate of inflation slowed to 2.4% from 2.8% in the previous quarter, falling within the Reserve Bank of Australia's target band of 2-3%.

Underlying inflation, as measured by the trimmed mean, also eased to 0.5%, below market forecasts and the lowest since mid-2021.

The softer inflation data has increased expectations that the RBA will cut interest rates as early as February. Markets are now pricing in an 80% chance of a 25 basis point rate cut at the central bank's next policy meeting on February 18.

"The softer inflation data is welcome news for the RBA and should pave the way for a rate cut in February," said Capital Economics economist. "However, the central bank is likely to remain cautious given the uncertainty surrounding the global economy."

Australian bond prices rose following the release of the CPI data, while the Australian dollar weakened.