by Dejan Pekic
RBA Cash Rate Update
Posted by Dejan Pekic
As widely expected, the Reserve Bank of Australia raised the official cash rate at its meeting on Tuesday, increasing it by 25 points to 4.35%. It’s the third consecutive hike this year, completely reversing last year’s cuts.
Inflation remains above the RBA target of 2–3%, with headline inflation reaching 4.6% for the 12 months to March, up from 3.7% in February, and underlying (trimmed mean) inflation sitting at 3.3%. Soaring fuel prices driven by the Middle East conflict and global oil shortages are a key factor, with the RBA flagging ‘second-round effects’ as those costs flow through the broader economy. This is intensifying cost-of-living pressures and may slow the economy further.
For investors, rate movements tend to ripple across markets. Bond prices typically fluctuate as rate-sensitive sectors such as property and high-growth equities come under pressure. Conversely, higher rates have continued to lift returns on cash, term deposits and defensive income assets, providing some alternatives for investors.
The RBA has signalled it will ‘do what it considers necessary’ to bring inflation under control, leaving the door open to further rate rises. The market is divided on whether more hikes are coming, but some major banks are forecasting additional rises by August.
With rates currently moving up, and potential broader impacts across investments, it may be a good time to review your retirement and superannuation strategies, particularly around fixed income exposure and asset allocation.
At Newealth, we guide you through market volatility with a diversified investment strategy and tailored recommendations. For a review of your financial plan, please contact us.
General Advice Warning:
The information in this blog is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider whether the information is appropriate for you and seek professional advice before making any financial decisions.
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