Australian shares closed higher on Wednesday as banking stocks rose on reduced fears about a sharp economic slowdown, after lower-than-expected inflation data raised hopes of a less hawkish central bank policy.

The S&P/ASX 200 index ended 0.2% higher at 6,823.20. The benchmark rose 0.3% on Tuesday.

“Lower than expected Australian CPI print today places less pressure on the RBA to pursue aggressive monetary tightening to contain inflation,” said Cameron McCormack, a portfolio manager at VanEck Australia.

Data from the Australian Bureau of Statistics showed that consumer price index (CPI) jumped 1.8% last quarter, just short of market estimates of 1.9%.

The annual rate rose to 6.1% from 5.1%, the highest since 2001 and more than twice the pace of wage growth.

Investors also awaited a US Federal Reserve meeting later in the day, where the central bank is expected raise rates. On the domestic bourse, financial stocks rose 1.1%, with the so-called “Big Four” banks gaining between 0.4% and 2.2%. Gold stocks rose 1.3% after bullion inched up overnight.

Miners fell 1.3% despite a rally in iron ore prices.

McCormack said that investors might be concerned about an imminent global recession and China’s COVID-zero stance.

Miner Rio Tinto reported a 29% drop in first-half profit after market close on Wednesday, hurt by weaker iron ore prices due to cooling demand from top consumer China, higher costs and labour shortages.

Energy, miners lift Australian shares; Fed, inflation in focus

Its shares ended 2% lower in the session.

Energy stocks also followed suit to end 0.3% lower. New Zealand’s benchmark S&P/NZX 50 index fell 0.3% to finish the session at 11,135.03.