7 Mar 2023
The Reserve Bank of Australia (RBA) Board increased the cash rate by 0.25% to 3.60% at its March meeting.
March 2023 - Article provided by PSK's Chief Investment Officer Chris Lioutas.
The move was expected by markets given the RBA’s February statement was taken by many to be more hawkish (ie. rates higher) than the previous one.
This time around, there was little adjustment to the statement and little in the way of surprises to the adjustments made.
Key points markets will focus on include:
- Clarification that whilst headline inflation is moderating, services inflation is not – this is problematic for central banks globally
- Refrained from providing economic forecasts (inflation, economic growth, unemployment) for this year in the statement, but still believe that inflation will fall to 3% by mid-2025.
- They gave themselves more optionality regarding the path of rate hikes from here by removing words that suggest more rate increases in the “months ahead” – the market looks to have taken the change in wording to be more dovish.
We still believe that the RBA is near the end of this rate hiking cycle given the lagged effects of last year’s hikes (and this year’s) have yet to be felt by households and the broader economy, but soon will be, particularly for those carrying debt.
Following their announcement, Australian equities moved higher, the AUD/USD fell, and bond prices rose (ie. yields lower).
As always, if you have any questions or your personal circumstances have changed please do not hesitate to contact your financial adviser
General Advice Warning - Any advice included in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.
