Australian consumer prices dipped month-on-month in January, dragged lower by a slowdown in housing costs and a drop in holiday travel, an outcome that should help reassure policymakers that inflation is heading in the right direction.

The Australian Bureau of Statistics’ January inflation print shows that trimmed mean inflation, which the Reserve Bank uses to measure Australia’s inflation rate, came in at 2.8 per cent, up from 2.7 per cent in December.

Data from the Australian Bureau of Statistics on Wednesday showed the monthly consumer price index (CPI) fell 0.2% in January from December, when it rose 0.8%. The annual pace held at 2.5%, matching market forecasts.

Australia’s disinflationary progress has slowed, with underlying inflation ticking up slightly in January. However, there are encouraging signs in the housing sector, as rental and construction costs continue to decelerate.