Australian Dollar Holds Steady Amid Persistent Inflation

The Australian Dollar held steady after the January Consumer Price Index (CPI) report was released, showing annual inflation at 3.4% as of January. This matched consensus forecasts and remained within the Reserve Bank of Australia's (RBA) target band.

ING economists noted that the RBA's 'hold bias' is likely to persist until more convincing evidence shows that inflation will sustainably return to the 2-3% target midpoint.

The trimmed mean inflation, a key underlying measure, rose 3.8% year-on-year, still above the RBA's comfort zone.

Financial markets are pricing in a roughly 50% chance of a rate cut by August 2025, but ING suggests that the RBA will remain data-dependent, with upcoming labour market and services inflation figures likely to be decisive.