At lunchtime AEST on Wednesday, the S&P/ASX200 index was down 80.5 points, or 1.04 per cent, to 7,685.8, while the broader All Ordinaries had dropped 79.1 points, or 0.98 per cent, to 7,955.8.
The ASX200 was already down 52 points and fell another 22 in the space of two minutes after the Australian Bureau of Statistics reported that consumer prices rose 3.6 per cent in the 12 months to April, up from 3.5 per cent for the year to March.Â
Consensus expectations were for inflation to cool to 3.4 per cent.
Betashares chief economist David Bassanese said the sticky inflation readout would test the Reserve Bank's patience, and make a rate cut before Christmas unlikely.
"Indeed, there's a simmering risk that the RBA may feel obligated to raise rates further to reduce inflation in those demand-sensitive areas it can influence," he wrote, putting the odds of such a hike at around 30 to 40 per cent.
Saxo head of FX strategy Charu Chanana said the readout could give RBA reason to postpone rates cuts, but was unlikely to bring rate hikes back on the table given the loosening of the Australian labour market and stretched consumers.
Every sector of the ASX was lower at midday, with the industrials the biggest loser, down 1.9 per cent as Qantas fell 3.1 per cent and Brambles dropped 2.3 per cent.
All four of the big retail banks were lower, with ANZ down 2.1 per cent, NAB down 2.0 per cent, Westpac falling 1.9 per cent and CBA slipping 1.7 per cent.
In the heavyweight mining sector, Fortescue had slid 2.5 per cent, Rio Tinto had fallen 1.4 per cent and BHP was up 0.1 per cent amid reports that the Big Australian might ask Anglo American for more time to reach a deal on its $74 billion takeover offer.
Goldminers were up slightly as the precious metal traded for $US2,357 an ounce, with Evolution gaining 0.4 per cent and Newmont adding 0.3 per cent.
Fisher & Paykel Healthcare had advanced 4.4 per cent to a nearly two-week high of $26.56 after the Auckland-based respiratory products company said it had grown revenue by 10 per cent to $NZ1.74 billion ($1.6 billion) in the 12 months to March 31.
"After several years of changing demand patterns, we are pleased to have returned to a trajectory of growth," managing director and chief executive Lewis Gradon said.
The Australian dollar was buying 66.50 US cents, from 66.61 US cents at Tuesday's ASX close.
