Market closes lower, after RBA lifts interest rates by 0.5%
The market ended the day down, after the Reserve Bank of Australia (RBA) increased the cash rate target by 50 basis points to 2.35%.
The S&P/ASX200 was down, falling 25.70 points or 0.38%, and sitting at 6,826.50 at the end of trading.
It’s the fifth consecutive month that the RBA has increased rates, as it seeks to reign in inflation, while keeping the economy on an even keel.
In a statement, RBA Governor, Philip Lowe, signalled further rate hikes ahead, as he works to return inflation to the 2–3 per cent range over time.
Lowe said inflation in Australia is the highest it’s been since the early 1990s and is expected to increase further over the months ahead.
The RBA rate hike stirred major Aussie bank stocks, with ANZ Bank (ASX:ANZ), National Australia Bank (ASX:NAB) and the Commonwealth Bank of Australia (ASX:CBA) all up shortly after the announcement.
Gains trimmed in early afternoon, as market awaits RBA meeting
The S&P/ASX 200 has dropped to 6,858.10 in early afternoon trading, after hitting a three-day high of 6888.5 earlier in the day.
It comes ahead of the Reserve Bank of Australia (RBA) meeting mid-afternoon, where the the RBA is tipped to raise interest rates.
Lithium stocks have rallied with Pilbara Minerals Limited (PLS) and Liontown Resources leading the charge, up 5.81% and 4.79% respectively.
Lithium commodity prices are up more than 280% for the year, on the back of surging demand for electric vehicle car batteries.
ASX opens higher
The S&P/ASX200 moved higher in the opening hour of trading, gaining 27.30 points or 0.40% to 6,879.50, ahead of today’s Reserve Bank of Australia (RBA) meeting, which is set to result in another interest rate hike.
Zip Co Ltd. (ZIP) stocks bounced back after plunging yesterday, following news it would be removed from the ASX 200. Its shares increased by more than 6% in morning trading.
Across the market, Consumer Staples has been the best performing sector, up 0.64% for the past five days.
Overall the sectors have been mixed, with nine of 11 sectors lower over the last week.
Australian shares are set to open higher today, with ASX futures up 0.07% to 6,836.0, just before 6.30am AEST.
It follows a positive end to Monday’s trading, with the S&P ASX200 closing 0.34% higher at day’s end.
All eyes will be on the Reserve Bank of Australia (RBA) policy meeting today, with markets anticipating another interest rate rise in the offing.
Most analysts are expecting the RBA to deliver its fourth consecutive 0.5 percentage point rise, increasing the cash rate to 2.35% from 1.85%.
The Australian dollar was sitting near US68¢ at local close.
In northern hemisphere markets, there was no action on Wall Street, with markets closed for the Labor Day holiday, while European markets slipped back during their trading period.
Spot gold was sitting at $US1,710.00 an ounce, up 1.8%, approaching 7am AEST. Brent crude was at $US93.02 a barrel. Iron ore was sitting at $US97.85 a tonne. Bitcoin was hovering around $US19,700.
On the agenda
The market will be watching closely when the Reserve Bank of Australia announces its latest interest rate intentions at 2:30pm AEST, as it continues its bid to curb spending and inflation.
Consensus among analysts is that the RBA will hand down its fourth consecutive 0.5 percentage point rise, increasing the cash rate to 2.35% from 1.85%.
There’s predictions among some, that going forward the RBA will favour smaller increases in the coming months, as prior rate hikes throughout the year begin to take greater hold.