Consumer prices rose 3.7 per cent in the 12 months to February, down from 3.8 per cent in January, data from the Australian Bureau of Statistics on Wednesday showed.
Economists from National Australia Bank had predicted the headline rate to hold at 3.8 per cent.
Trimmed mean inflation - which excludes volatile items to provide a sense of underlying inflation - held steady at 3.3 per cent.
The largest contributor to price growth was housing, which rose 7.2 per cent, the bureau's head of prices statistics Sue-Ellen Luke said.
Electricity costs were the main factor, rising 37 per cent over the year as government rebates rolled off.
Excluding Commonwealth and state subsidies, electricity prices rose 4.9 per cent.
But strong growth in new dwelling costs (3.7 per cent) and rents (3.8 per cent) will also worry the Reserve Bank.
Transport costs actually fell 0.2 per cent in the year to February, thanks to a 7.2 per cent drop in fuel costs. But that is set to reverse in March, with some economists predicting fuel could rise by more than 25 per cent.
While the data had been overtaken by recent events, it remained important in shaping the RBA's assessment of how inflationary domestic conditions were before the Iran shock, NAB senior economist Taylor Nugent said.
He expects inflation to hit 4.6 per cent in March before peaking at five per cent later in the second quarter.
The central bank raised interest rates for a second straight month earlier in March.
Governor Michele Bullock said the Iran war would add to Australia's inflation problem, but domestic conditions were too tight before its outbreak.
Before the inflation release, money markets were pricing in another three rate hikes by Christmas, which would leave the cash rate at its highest level in 15 years.
Marc Jocum, senior product and investment strategist at Global X, said the inflation print "felt like a calm beach without waves just before a storm hits".
"This was February's inflation, frozen in time before Middle East tensions escalated, before oil flows through the Strait of Hormuz came under threat, before fertiliser and food risks seeped back into the system, given that roughly a third of global fertiliser and a fifth of oil supply runs through that critical artery," he said.
"Inflation doesn't politely knock on the door asking if it can come in - it creeps in quietly, then arrives all at once.
"Consumer inflation expectations have surged to a record 6.9 per cent, jumping 1.7 per cent in just four weeks, while mortgage stress is rising too."
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