Cash rate lifts to 1.35%

While it came as no real surprise, the market was clearly comforted by the Reserve Bank’s (RBA) decision to lifts the official cash rate by 50 basis points to 1.35% this afternoon, with the share market moving slightly higher following the 2.30pm announcement.

Within minutes the S&P/ASX200 rose from a gain of 0.1% ahead of the announcement to a 0.4% gain to 6638.8.

The energy sector rose 2.5%, while the IT and healthcare sectors were both up over 1%.

A$/bond yields lower

In the wake of the RBA’s 50 basis point decision, the A$ has fallen by around 0.25% to US$68.61c, while the 3-year bond yield was also fractionally lower at 3.09%.

Meantime, the 10-year bond yield has also fallen to 3.59%, from 3.62%.

Based on calculations by comparison website RateCity, a household with a $750,000 loan can now expect to be paying $500 more in monthly interest than in April when the cash rate was at a record low of 0.1%.

2.5% by early 2023

RBA governor Philip Lowe now expects inflation to peak at 7%-plus by the end of the year.

While Lowe says it’s reasonable to expect the cash rate to push towards 2.5% by early next year, futures markets are betting it will be above 3% by December.

S&P/ASX 200 movement today.