Softer Australian CPI offers little relief as RBA seen hiking amid energy-driven risks. Earlier:Australia February CPI cools slightly, but energy shock clouds inflation outlookSummary:February CPI undershoots expectations slightlyTrimmed mean inflation also comes in softerData suggests inflation cooling marginally pre-shockLabour market still tighter than full employmentInflation seen returning to target only graduallyIran-driven energy shock adds upside inflation risksRBA likely to tolerate weaker growth over inflation missNAB expects May hike to 4.35%Australia’s February inflation data showed a modest easing in price pressures, but not enough to materially alter the Reserve Bank of Australia’s tightening bias, according to National Australia Bank.Headline CPI rose 3.7% year-on-year, slightly below NAB’s forecast and market consensus of 3.8%. The monthly trimmed mean, a key measure of underlying inflation, increased by 0.2% on the month and 3.3% annually, also coming in just under expectations.NAB said the data suggest underlying inflation was tracking marginally cooler than the RBA had anticipated in its February Statement on Monetary Policy, at least prior to the recent escalation in Middle East tensions and the associated energy price shock.Alongside last week’s rise in the unemployment rate, the latest inflation figures may ease some of the central bank’s concerns about excess demand and inflation persistence. However, NAB emphasised that any relief is likely to be limited.The bank maintains that Australia’s labour market remains somewhat tighter than is consistent with full employment, while inflation was already expected to return to target only gradually. That underlying backdrop, NAB argues, remains largely unchanged despite the softer-than-expected data.Crucially, the inflation figures predate the sharp rise in global energy prices linked to the Iran conflict, which is expected to add renewed upward pressure on inflation in coming months. As a result, policymakers are likely to place greater weight on forward-looking risks rather than backward-looking data.NAB said the RBA is therefore likely to prioritise avoiding a sustained overshoot of its inflation target, even if that comes at the cost of weaker growth or a further easing in labour market conditions.Against this backdrop, the bank continues to expect the RBA to deliver another 25 basis point rate increase in May, taking the cash rate to 4.35%, as it seeks to contain inflation risks in an increasingly uncertain global environment. This article was written by Eamonn Sheridan at investinglive.com.