Canberra, March 25 : Australia's annual rate of inflation fell to 3.7 per cent in February, defying the expectation of economists who had forecast it would remain at 3.8 per cent.

According to official data released by the Australian Bureau of Statistics (ABS) on Wednesday, the consumer price index (CPI) rose by 3.7 per cent in the year to February, down from the 3.8 per cent reported in December and January, Xinhua news agency reported.

The Australian Broadcasting Corporation reported earlier on Wednesday that financial markets were expecting headline inflation to remain at 3.8 per cent for the third consecutive month.

The ABS said that the annual trimmed mean, a measure of underlying inflation preferred by the Reserve Bank of Australia (RBA), remained unchanged at 3.3 per cent in February, above the central bank's 2-3 per cent target range.

Wednesday's data follows a decision by the RBA's Monetary Policy Board on March 17 to lift the official cash rate for the second consecutive month to 4.1 per cent.

The board said at the time that higher fuel prices driven by the conflict in the Middle East would add to inflation.

Responding to the ABS data, Treasurer Jim Chalmers said in a statement posted on social media on Wednesday that inflation was too high before the outbreak of the war and that the conflict would make it worse.

Chalmers said earlier in March that a prolonged conflict could cause inflation to peak at above 5.0 per cent in 2026 and said in a speech to a business event on Tuesday that the government is working through a "broader than usual range of options" to address inflation.

The ABS identified a 7.2 per cent rise in housing prices as the biggest driver of inflation in the year to February, followed by a 3.1 per cent rise in food and non-alcoholic beverage prices.

/IANS