Slight reprieve as inflation cools to 2.7 per cent

Australians have been gifted a slight reprieve, with inflation moderating to 2.7 per cent as price pressures hurt shoppers at the checkout.

The drop in the inflation figure spanning the 12 months to August was spurred by a decrease in transport (-1.1 per cent) while housing (2.6 per cent), food and beverages (3.4 per cent) and alcohol and tobacco (6.6 per cent) brought it higher.

Interest rate hikes have sought to take the wind off the back of the economy and slow inflation to the central bank's target range of two to three per cent.

The consumer price index fell a day too late for the Reserve Bank after it decided to keep interest rates on hold at 4.35 per cent.

The RBA pays most attention to underlying inflation when making rates decisions.

The volatility of the monthly figure makes it less influential than the quarterly one, next due in October, RBA governor Michele Bullock said.

Inflation was 3.8 per cent over the 12 months to the June 2024 quarter.

Mortgage holders shouldn't hold their breath for a pre-Christmas rate cut, with underlying inflation too high.

National Australia Bank senior economist Tapas Strickland predicted the headline monthly figure won't make any difference to the likelihood of the central bank cutting rates

He expects the first cut in May, while economists at ANZ and Westpac have pencilled one in for February.