SYDNEY (AP) — Inflation in Australia has slowed to its lowest rate in three years, the country’s official statistics agency said Wednesday, raising hopes of a “soft landing” for the nation’s economy.

The Australian Bureau of Statistics said the latest consumers price index, or CPI, fell to 4.1%, down from 5.4% in September.

The result means annual inflation rate is now at its lowest level since December 2021, while quarterly inflation was 0.6%, down from 1.2% in September.

The decline was faster than market expectations for a 4.3% annual increase and a 0.8% quarterly rise.

“While prices continued to rise for most goods and services, annual consumer price index inflation has fallen from a peak of 7.8% in December 2022, to 4.1% in December 2023,” the head of price statistics, Michelle Marquardt, said in a statement.

While the CPI is still above the Reserve Bank of Australia’s target band of 2-3%, the bigger than expected slowdown will raise mortgage holders’ hopes that relief on interest rates could be within sight.

The RBA will meet on Tuesday to review the official cash rate — which currently sits at 4.35%. The latest results will support the case that inflation is being tamed, moderating the need to lift rates that are at the highest level since December 2011.

The central bank manipulates interest rates to keep inflation within its target band.

Australian Treasurer Jim Chalmers said the numbers were “very encouraging”.

“But it’s not mission accomplished yet, because we know people are still under the pump,” he told reporters in Melbourne on Wednesday.

The fresh progress on Australia’s inflation challenge comes a day after the International Monetary Fund said it had upgraded its outlook for the world economy, including for Australia, this year.

The agency said it now expects the global economy to grow 3.1% this year, which was 0.2 percentage points better than in its previous estimate in October.

Australia similarly had its growth forecasts bumped up by 0.2 percentage points in 2024 with the agency expecting Australia’s economy to expand 1.4% in 2024 and 2.1% in 2025.

“We are now in the final descent toward a soft landing,’’ Pierre-Olivier Gourinchas, the IMF’s chief economist, told reporters on Tuesday ahead of the report’s release. “The clouds are beginning to part.”

“But the pace of expansion remains slow and turbulence may lie ahead.”