BUZZ-COMMENT-Australia Q4 CPI likely to pave way to Feb rate cut

Jan 28 (Reuters) - Australia's fourth-quarter consumer price report on Wednesday is key for Reserve Bank of Australia expectations and might be benign enough to prompt an easing as early as February.

Annual Q4 headline CPI is forecast to drop to 2.5%, the lowest since early 2021, though this may be distorted by electricity rebates. Monthly CPI for December will also be released.

More significantly, the trimmed mean CPI, a closely watched measure of core inflation, is seen slowing to 3.3% from 3.5% previously, bringing it closer to the RBA's 2%-3% target band.

An as-expected reading would confirm the waning inflation backdrop indicated by November monthly CPI. A slowing economy and cooling home prices present more reasons for a February rate cut, though a strong labour market may deter the RBA.

Markets have priced in an around 65% chance of a 25-basis-point cut to the 4.35% cash rate on Feb 18. 0#AUDIRPR

The AUD has been trending lower since October on a combination of a robust U.S. economy, doubts about further Federal Reserve rate cuts, the expected inflationary effects of President Donald Trump's policies, and an elusive China recovery. A benign CPI will add bearish pressure.

AUD/USD has initial support at 0.6131, the Jan 13 five-year low, followed by 0.6099, the 76.4% Fibonacci retracement of its post-COVID rally from 0.5510 to 0.8007. Resistance is at 0.6335-45.

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