The S&P/ASX200 rose 68.6 points by midday, or 0.85 per cent, to 8010.4, while the broader All Ordinaries rose 67.2 points, or 0.81 per cent, to 3079.3.
Headline inflation fell 0.1 per cent to 2.4 per cent in the year to February, and by the same amount to 2.7 per cent for trimmed mean inflation.
Quarterly price growth is within the Reserve Bank's target range of two to three per cent, and the central bank is likely to wait until quarterly figures next month before making a call on its next rate cut.
"The RBA's hawkish 25 basis point rate cut in February has been followed by a slowing global growth outlook, softer-than-expected Australian wages and jobs data, and another benign inflation print today," IG Markets Tony Sycamore said.
"We expect the RBA to keep rates on hold at 4.1 per cent at its meeting next week and use the board meeting to prepare the market for a 25 basis point rate cut in May, pending the release of in-line Q1 inflation data on April 30th."
Ten of 11 local sectors were trading higher by noon, with materials stocks leading the market, up 1.3 per cent.
BHP and Rio Tinto were both up more than 1.2 per cent after a sell-off on Tuesday, helped by a lift in iron ore prices as Chinese steel exports hit a record-high despite falling global production in January and February.
Financials also rallied, rising 1.2 per cent as the big four banks all gained more than one per cent. ANZ outperformed, lifting 2.7 per cent to $29.35, after no impact on its near-term growth from the federal budget.
Energy stocks continued to catch a bid, up 1.2 per cent for the day and more than five per cent from intra-month lows, helped by a lift in oil futures as US President Donald Trump threatened tariffs on countries importing the commodity from Venezuela.
Brent crude futures were trading 25 cents higher, or 0.3 per cent, to $US73.27.
Health care stocks were trading lower, although falls in larger caps CSL and Pro Medicus were out-weighing gains from smaller players like Fisher and Paykel Healthcare, the top 200's best performer by noon, up 4.2 per cent to $31.55.
Qantas shares jumped 3.1 per cent after the airline hosted a launch of its new long-range Airbus aircraft, in what chief executive Vanessa Hudson called "the biggest fleet renewal in our history".
The Australian dollar is buying 62.91 US cents, up slightly from 62.89 US cents on Tuesday.
The Aussie slipped 0.3 per cent after inflation fell steeper than FX traders expected, but the 10 basis point drop in the monthly measure was in line with with predictions from analysts and economists interviewed by AAP.
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