Closing Bell 7th November: RBA Raises Cash Rate to 4.35% Amid Inflation Concerns

RBA lifts cash rate 0.25pc to 4.35pc; $A drops

The Reserve Bank of Australia (RBA) has increased the cash rate by 0.25 percentage points to 4.35%, leading to a drop in the Australian dollar to US64.62¢. This move reflects the RBA’s cautious stance on future rate hikes amid persistent inflation. Despite inflation peaking, it remains stubbornly high, particularly in the services sector. The RBA aims for inflation to hit around 3.5% by the end of 2024, with a gradual rise in unemployment expected. This rate hike, the first since July, comes after significant price increases and robust retail sales. The RBA will reassess its position at the next policy meeting in December and will release comprehensive economic projections soon.

Cost-of-living relief Labor’s top priority: Chalmers

Treasurer Jim Chalmers emphasizes the government’s commitment to combating inflation and providing cost-of-living relief. Despite a slight moderation in inflation and economic slowdown, the persistence of inflationary pressures remains a concern. The government’s focus is on delivering immediate relief to households, improving the fiscal situation, and addressing housing and skills shortages. Chalmers acknowledges the public’s desire for a quicker reduction in inflation and assures that the government’s strategies are aligned with easing the inflation burden.

Australian dollar slips after cautious RBA

Following the RBA’s expected rate hike to 4.35%, the Australian dollar fell, reflecting the central bank’s cautious approach to further monetary tightening. The RBA’s statement introduced uncertainty with the inclusion of “whether,” suggesting that future rate increases will be data-dependent. This subtle shift in language indicates a softer tightening bias than in previous communications. The bond market responded, with Australian three-year bond futures rising as traders scaled back expectations for additional rate hikes.