Australian shares fell for the third consecutive session tracking US markets as investors await inflation data that may influence the timing of upcoming interest rate cuts.

The S&P/ASX 200 Index fell 0.5% or 39.4 points to 8.353.6.

Market participants expect signals of a US rate pause in January, following Fed officials' hints of slower easing due to a strong economy, Reuters reported.

If inflation data comes in line with estimates, investors may expect the Fed to lower rates by 25 basis points next week, Reuters added.

On the domestic front, The Reserve Bank of Australia (RBA) remains more likely to deliver its first rate cut in May than in February, with its latest monetary policy statement pointing to generally dovish rhetoric, ANZ Research said.

Also commenting on the matter, Morgan Stanley said that RBA's December monetary policy statement is the clearest indication yet of the board's pivot towards rate cuts.

In company news, National Australia Bank (ASX:NAB) agreed to sell its remaining 20% stake in MLC Life Insurance to Nippon Life Insurance for AU$500 million.

The Australian Securities and Investments Commission (ASIC) has begun legal proceedings against Regional Express Holdings (ASX:REX) over the beleaguered company's alleged misleading statement about its profitability and breaches of disclosure obligations during the fiscal year 2023.

South32 (ASX:S32) said road blockages amid escalating civil unrest hinder the transport of raw materials to Mozal Aluminum in Mozambique. The mining firm is withdrawing its production guidance for the smelter as it responds to the situation. Shares fell almost 6% on Wednesday's close.