US Inflation Eases, Australian Consumer Mood Softens

• US inflation data for December came in slightly softer than markets feared, reinforcing confidence that the US Federal Reserve remains on track to deliver rate cuts later this year.
• Core CPI rose 0.2% m/m (vs 0.3% expected), with annual core inflation steady at 2.6%. Headline CPI increased 0.3%, in line with consensus.
• Locally, consumer confidence lost momentum. The Westpac–Melbourne Institute Consumer Sentiment Index slipped 1.7% in January to 92.9, a three-month low, following December’s sharp pullback as rate expectations continued to weigh on households.
• The pullback was driven by a softer near-term outlook, with around two-thirds of consumers now expecting mortgage rates to rise in 2026.
• Unemployment expectations also deteriorated, with the index lifting 2.1% to 129.4, slightly above its long-run average, signalling rising concern around job prospects.