POWERED BY MOMENTUM MEDIA
RBA reveals highly anticipated rate call
February’s rate decision has been the most anticipated in over a year.
For the first time in over four years, the Reserve Bank of Australia has delivered a rate cut, reducing the rate from 4.35 per cent to 4.10 per cent, and joining its global peers in softening monetary policy in response to a decline in inflation.
The RBA last cut rates in November 2020, when the central bank reduced the rate from 0.25 per cent to a record low of 0.10 per cent to support the economic recovery from the COVID-19 pandemic.
In its statement on Tuesday, the RBA said: “The board’s assessment is that monetary policy has been restrictive and will remain so after this reduction in the cash rate. Some of the upside risks to inflation appear to have eased and there are signs that disinflation might be occurring a little more quickly than earlier expected. There are nevertheless risks on both sides.
“The board will continue to rely upon the data and the evolving assessment of risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market. The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.”
The market had been pricing in a 90 per cent chance of 25 bp decrease on Tuesday, which several economists judged was too optimistic despite most aligning with the view that the bank would in fact cut.
Saxo’s chief investment strategist Charu Chanana said on Monday: “The Australian Q4 CPI miss a few weeks ago has really prompted expectations that the RBA will cut this time around – although the labour market is still quite strong, so the RBA doesn’t need to be as aggressive.”
In a similar vein, Scott Solomon, co-portfolio manager at T. Rowe Price, predicted a 25 bp cut, saying that not cutting would risk the RBA’s credibility, particularly given its emphasis on returning inflation to the 2–3 per cent target range.
Shane Oliver, chief economist at AMP, similarly forecast a 0.25 per cent cut, citing a growing confidence that inflation is sustainably returning to target.
February’s board meeting is the last time the RBA will meet in its current format, with the two-board system due to kick in from next month.
More to come.
Recommended for you
Prime Minister Anthony Albanese has called a federal election for 3 May, seeking to capitalise on Labor’s recent budget, just hours after Peter Dutton outlined his economic plan and accused the government of fuelling inflation through excessive spending.
Australia’s largest super fund, AustralianSuper, has divested its stake in WiseTech Global, citing concerns over the company’s governance and management, which failed to meet the fund’s expectations.
While the superannuation sector has welcomed stability in super settings, statements following Tuesday’s budget announcement indicate there are areas the sector believes the budget fell short.
Treasurer Jim Chalmers' fourth budget revealed a $207 billion fiscal turnaround, with tax receipts, superannuation revenue, and debt reduction playing key roles.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Global X GlobalX FANG+ ETF
33.51 3 y p.a(%)
2
Spire Oaktree Opportunities XI Second Close
32.68 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.62 3 y p.a(%)
4
Spire Oaktree Opportunities XI First Close USD
31.36 3 y p.a(%)
5
Fidante Credit Suisse Global Private Equity
29.60 3 y p.a(%)
