An unexpected pickup in inflation is unlikely to make a real difference to the outlook.
Economists had been expecting a quarterly rise in the consumer price index in the region of 0.2 to 0.7 per cent, but were surprised when official figures showed an increase of 0.8 per cent in the December quarter.
And it pushed the annual rate of inflation into the top half of the RBA's two to three per cent target range.
Annual growth in the CPI picked up to 2.7 per cent from 2.2 per cent previously, the Australian Bureau of Statistics said on Wednesday.
The two measures of underlying inflation favoured by the Reserve Bank of Australia posted quarterly rises of 0.9 per cent and annual growth rates of 2.6 per cent.
Economists forecasts had been clustered around 0.6 per cent, so this was an upside surprise as well.
The jump in the Australian dollar soon after the figures, from below 88.0 US cents to above 88.6, was a classic reaction to unexpected news of strong inflation.
It was driven by the presumption that it will erode the RBA's bias toward more interest rates cuts if required by a sluggish economy.
The futures market is still pricing in slightly more chance of a rate cut than a hike in the cash rate from its current 2.5 per cent in the coming few months, putting it at about 2.45 per cent in June.
But that's a retreat from the implied June cash rate of 2.37 per cent the market had been pricing in ahead of the inflation figures.
But whether or not the figures have changed the outlook for inflation depends on the reason for the outsized quarterly increase.
The rise could be the result of imported inflation filtering through the economy after the exchange rate's fall last year.
If so, and if the RBA is confident that these won't cause persistent "second-round" effects on inflation, then they will have no bearing on policy.
If it's due to a strong economy generating wage and price pressures then a greater reluctance to cut interest rates would certainly be warranted.
But the economy is not strong.
Last week's confirmation of a flat trend in employment confirmed that.
So the RBA's willingness to consider lowering the cash rate again will remain, especially if the Aussie dollar continues to rise on the back of these figures.
In either case, the tone of the RBA's recent commentary suggests the central bank is happy with a wait-and-see stance for the time being.
And it would obviously rather not have to cut again, mainly for fear of causing the housing market to overheat.
But with inflation still within the target range and the economy struggling to raise a trot, another drop in the cash rate this year should not be ruled out.
