The S&P/ASX 200 Index (ASX: XJO) finished Tuesday virtually flat after the RBA rate decision to hold the cash rate at 4.35%.
Pleasingly for investors, the ASX 200 rose 0.3% from the time of the RBA rate call to the point of the market closing later in the afternoon.
But, Australia’s central bank did have a number of comments about its current view on inflation and also revealed whether it’s still thinking about interest rate rises.
Inflation comments
The RBA noted in its latest statement that the latest data shows headline and underlying inflation are still too high.
Oil prices have reduced in recent weeks, though energy and related commodity prices are still higher than they were before the conflict in the Middle East.
But, the RBA also noted that there are signs some businesses are experiencing cost pressures and deciding to increase their prices.
Overall, short-term inflation expectation measures have “eased but remain higher than earlier in the year”.
The RBA did point out that with tighter financial conditions, there are signs that consumer spending is slowing as expected, while momentum in the housing market has also shifted to declines in some capital cities.
Australia’s central bank said that the unemployment rate was higher than expected in April, though other job market conditions have been more resilient.
The RBA is keeping an eye on global economic developments, which may impact growth for Australia’s major trading partners.
Have interest rates finished rising?
The RBA decided to hold the cash rate at the same level and assess the impact of its previous interest rate rises, as well as the impact of the oil supply disruption.
It said it would continue to do what’s necessary to achieve its goals related to price stability (and full employment), including “increasing the cash rate target further if required”.
For borrowers, t’s a positive sign that the raises have halted considering there have already been three rate rises this year, which is a quite a lot to absorb.
While inflation is still too high, I think there’s a good chance we may have seen the last rate rise during this cycle, unless the Middle East situation somehow deteriorates further.
After so many rate rises, I think there are plenty of attractive opportunities within the ASX 200, particularly with certain ASX growth shares.
