Inflation Cools for a Third Straight Month

The latest consumer price data showed inflation easing for a third consecutive month, with the year-on-year rate falling as a drop in energy costs offset continued firmness in services prices. Markets had broadly expected the softer reading, and the reaction across equities and bonds was muted.

The decline was concentrated in categories most directly exposed to energy markets: transport and household utility costs fell noticeably, echoing lower crude oil and natural gas prices over the reporting period.

Core inflation, which strips out volatile food and energy components and is watched closely by policymakers as a gauge of underlying price pressure, ticked down only marginally and remains above the central bank's target. Shelter and services costs continue to be the primary drag on further progress.

Economists remain split on how the final stretch of the disinflation process will play out. Some argue that services inflation should continue to ease gradually as wage growth cools, while others caution that the 'last mile' back to target is often the hardest, since the remaining pressure tends to be in stickier categories.