Australia's inflation rate decelerated in the December quarter, with the consumer price index (CPI) rising by just 0.6 percent, down from 1.2 percent in the previous quarter, as reported by the Australian Bureau of Statistics. This increase fell below market expectations, which had predicted a rise to 0.8 percent. Annually, the CPI growth moderated to 4.1 percent from 5.4 percent.

This latest inflation data is a critical factor for the Reserve Bank of Australia (RBA) as it prepares to set monetary policy in its upcoming meeting. Despite the slowdown, some economists maintain that the RBA may opt for one more rate hike in this cycle to address persistent inflation in the services sector.

Internationally, traders have been scaling back expectations for rate hikes, with this trend particularly noticeable in the United States. In Australia, the likelihood of an interest rate rise in the next RBA meeting is perceived to be almost non-existent. However, the market has fully priced in a potential rate cut for the latter half of the year.

The US Federal Reserve is scheduled to announce its monetary policy decision soon, which could sway the RBA's own policy choices when it meets on February 5-6 following its summer recess. The last rate increase from Australia's central bank occurred in November.