By Poppy Johnston in Canberra

Australia’s inflation rate may have undershot expectations to hold at the bottom of the central bank’s target band but borrowers should not expect interest rate cuts just yet.

The annual headline inflation rate has held at 2.1 per cent in October for a second month, coming in a little below expectations of a 2.3 per cent rise.

But the Reserve Bank of Australia has been more focused on underlying measures in the later stages of its inflation fight.

The monthly gauge’s trimmed mean, which prunes unusual or temporary price changes, ticked higher to 3.5 per cent in October, from 3.2 per cent in September.

Bendigo Bank chief economist David Robertson said Wednesday’s figures would not prompt an interest rate cut as early as December – the last RBA board meeting of the year.

“The latest inflation data continues to support no change to official rates in December, but more evidence that the RBA should be cutting rates by May with the worst of the cost-of-living shock behind us,” Mr Robertson said.

While the 2.1 per cent annual headline rate was lower than expected, temporary state and federal energy rebates were primarily responsible.

“Underlying inflation measured by the ‘trimmed mean’ was higher at 3.5 per cent so more progress is needed on this front, with the full quarterly numbers to be released on January 29,” he said.

The Bureau of Statistics’ monthly inflation readout is considered more volatile and not as comprehensive as the quarterly version, with the RBA placing more emphasis on the latter.

In addition, the first month of the quarter only contains about 60 per cent of the surveyed prices within the consumer basket and few of the all-important services items.

The central bank has kept interest rates high at 4.35 per cent for more than 12 months to tame inflation.

With price pressures easing, economists are broadly of the view the next interest rate move will be down but the timing remains a source of debate, with stretched borrowers hoping for repayment relief as soon as possible.

Of late, markets have pushed out expectations for the first cut from February to March.

Treasurer Jim Chalmers said monthly headline inflation had held within the Reserve Bank’s target band for three consecutive months.

“While we welcome the progress we’ve made in today’s figures, we recognise that doesn’t immediately translate to how people are faring and feeling in the economy,” he said.

“We know inflation doesn’t moderate in a perfectly straight line and we see that around the world with inflation ticking up in the United States, United Kingdom, Canada and the Euro area,” he said.

Shadow treasurer Angus Taylor focused on underlying price measures and said core inflation was higher in Australia than in every other major advanced economy.

“Inflation is running the economy, not Labor,” he said.

Separate figures that feed into the nation’s quarterly growth outcome were broadly supportive of a weak but improving economy.

Construction work done lifted 1.6 per cent in September, the Australian Bureau of Statistics reported.

September quarter national accounts will be released next week.