Cheap petrol has dragged inflation to near three year lows but economists say there's no compelling case for an interest rate cut just yet.
The price of consumer goods and services rose just 0.2 per cent in the three months to December, for an annual rate of 1.7 per cent.
The consumer price index (CPI) figures were weaker than economists were expecting, and below the Reserve Bank's two-to-three per cent target band for the first time since 2012.
The weak result was mainly driven by recent sharp falls in the price of oil, which delivered a 6.8 per cent drop in petrol prices in the final three months of 2014, economists said.
But underlying inflation, which strips out the effects of such volatile price movements, actually came in stronger than economists were expecting, rising 0.7 per cent in the December quarter for an annual rate of 2.25 per cent.
Since that is the number the RBA focuses on, the inflation figures do not add to the case for a rate cut in the next few months, National Australia Bank senior economist David de Garis said.
"The headline figure is important ... it does effect people's pockets, but the RBA will focus on core rate," he said.
"There's not any evidence from CPI that would add to the case for a near term change in policy."
CommSec chief economist Craig James said the figures may persuade the RBA to use a more cautious tone in its monthly rate statement, but did not deliver a reason for a rate cut.
He expects the RBA to keep rates on hold over 2015.
"The RBA has got to be looking much more in terms of internal price pressures, pressures that the economy is generating, and the major reason why inflation was on the low side was external influences that may not always be there," Mr James said.
"There's no smoking gun in the inflation figures to suggest the RBA can cut interest rates."
Although a rate cut next week is unlikely, the inflation figures provide "plenty of scope" for the cash rate to drop to a new record low, AMP chief economist Shane Oliver said.
"With growth in the economy remaining sub-par and confidence subdued, further easing is likely to be necessary to provide a boost to non-mining activity," Dr Oliver said.
A cut may be needed in either March or April to keep the Australian dollar down, he added.
Westpac still expects the RBA to cut the cash rate by a quarter of a percentage point to 2.25 per cent on February 3.
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