Financial markets are betting the Reserve Bank will preview a rates reprieve in February, with official figures showing the RBA's preferred measure of inflation fell to 3.2 per cent over the year to December.

The largest price rises were alcohol and tobacco, along with recreation and culture, while housing and transport offset the increase.

Compared with the same period a year earlier it rose 3.2%, below both the consensus for a 3.3% rise as well as the central bank’s most recent forecast of a 3.4% increase.Trimmed mean inflation in the third quarter was 3.

Homeowners could finally get some interest rate relief, with a drop in underlying inflation giving the Reserve Bank grounds to cut the cash rate in February.

Australian consumer prices rose at the slowest pace in almost four years in the December quarter, while a pullback in housing costs helped cool core inflation and open the door to a cut in interest rates as early as next month.