After sharp falls for the ASX200 yesterday and a dive in US markets overnight the benchmark index has today lifted by 0.56% to 7,692 points.
Consumer Discretionary was the best-performing sector (+1.66%), followed by Property and Industrials. Energy, however, lost 1.79%.
RBA rate decision
The Reserve Bank board has left the cash rate unchanged at 4.35% for a sixth meeting in a row, saying “Data have reinforced the need to remain vigilant to upside risks to inflation, and the board is not ruling anything in or out.
"Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range.”
Responding to a question to the RBA governor about whether the central bank considered lifting interest rates at its meeting today, Bullock said: "The board did consider a rate rise at this meeting, as well as a hold.
"Where the board is now is that inflation is forecast to come back into the band at the end of 2025. If you look back, that's exactly where we were in November last year, inflation coming back into the band at the end of 2025.
"The board is trying, as we've said in the past, to steer a narrow path here, [and] not result in a spike in unemployment. We want to try and keep employment growing if we can.
"And the judgement of the board was that keeping the interest rate where it is and making sure that people understand that a rate cut is not on the agenda in the near term, given what we know that continued pressure will help to keep demand coming back into line with supply.
"That's the judgement the board's made."
Krishna Bhimavarapu, APAC economist at State Street (NYSE:STT) Global Advisors, said: “The RBA remained in a hawkish hold and made a dovish pivot today, as it now foresees headline CPI declining to 3.0% year-over-year by December 2024 (down from 3.8%), in line with our longstanding view.
"Most importantly, the bank now foresees higher unemployment rate, also in line with the risks that we fear. The bank balanced these by nudging-up the trimmed mean inflation.
“The RBA also seems to be uninterested in cutting rates without any clear and substantial progress, as it assumed no cuts in their updated forecasts. We think the outcome is well balanced but, nonetheless, we maintain our forecast of the first rate cut in November this year with the same risks even after the meeting today.”
Dr Dwyfor Evans, head of APAC Macro Strategy at State Street Global Markets said: “A largely hawkish hold from the RBA at its August meeting. Some of the optimism borne of weaker Q2 inflation has been largely discarded in favour of commentary that continues to see underlying inflation data as ‘too high’ as the Bank raises both core inflation and GDP forecasts.
“Continued vigilance to upside inflation risks that again indicate no rush from the RBA to adjust rates, particularly as Australia’s labour market remains tight with the unemployment rate well below its 10-year average and fears over the inflationary impact of fiscal measures in the medium term. We still consider the RBA as a G10 laggard in terms of normalising interest rates.”
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