Economy

Cash rate lifts to 1.35%

Tue 05 Jul 22, 3:21pm (AEST)
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Key Points

  • The A$ has fallen by around 0.25% to US$68.61c
  • 3 year and 10 year bonds were lower following the result
  • RBA governor Philip Lowe now expects inflation to peak at 7%-plus by the end of the year

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.

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S&P/ASX 200 movement today.

 

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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