Australia's inflation eased by more than expected in October as goods prices fell, while core inflation also edged down, a result that adds to the case against another rise in interest rates as soon as next week.

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Data from the Australian Bureau of Statistics on Wednesday showed its monthly consumer price index (CPI) rose at an annual pace of 4.9 per cent in October, down from 5.6 per cent in September and below market forecasts of 5.2 per cent.

For the month, CPI fell by 0.3 per cent in October, driven by declines in petrol, rent and holiday travel.

A closely watched measure of core inflation, the trimmed mean, rose an annual 5.3 per cent in October. The CPI excluding volatile items and holiday travel slowed to 5.1 per cent, the lowest since April 2022.

The benign result saw the bond market extend its rally with the three-year bond futures up 12 ticks to 95.95, while the Australian dollar intially dipped to $0.6637 before stabilising at $0.6655.

Analysts have cautioned that the monthly inflation data are heavily skewed towards goods in the first month of the quarter and do not capture price changes for a range of services, from hairdressers and dentists to dining out.

Prices for tradable goods fell 1.6 per cent in October from a month earlier.

"We don't see the October Monthly CPI Indicator in isolation as being particularly influential for the near-term path of policy," said Taylor Nugent, a senior economist at at National Australian Bank.

"Inflation has moderated in Australia, but the question for the RBA is whether domestic pressures are easing enough to be comfortable on the path back to at-target inflation."

The persistance in services inflation is one reason that the Reserve Bank of Australia ended four months of steady policy and raised interest rates to a 12-year high of 4.35 per cent this month. It also left the door to further tightening if necessary to meet its target of annual consumer price inflation of 2-3 per cent, on average, over time.

Financial markets still see the RBA to hold policy steady in December but imply an about 50 per cent chance of one further hike to 4.60 per cent in the first half of next year.