The ASX fell half of a per cent and the Australian dollar rose after the Reserve Bank lifted the cash rate target by another 25 basis points to 3.35 per cent.
It's the ninth rate hike in a row.
Disclaimer: this blog is not intended as investment advice.
Key events
Live updates
How the market ended the trading day - 4.40pm AEDT snapshot
By Rachel Pupazzoni
- ASX 200: -0.4pc to 7,504 points
- All Ords: -0.5pc to 7,504 points
- Australian dollar: +0.7% at 69.32 US cents
- Nikkei: -0.6% to 27,676 points
- Dow Jones (close): -0.1% to 33,891
- S&P 500 (close): -0.6% to 4,111
- Nasdaq (close): -1% to 11,888
- FTSE (close): +0.8% to 7,837
- EuroStoxx 600 (close): -0.8 to 457
- Brent crude: +1.6% to $US81.23/barrel
- Spot gold: +0.4% to $US1,874/ounce
- Iron ore: -1.5% to $US123 a tonne
- Bitcoin: 0.0% to $US22,915
That's all for today, and what a day it was!
By Rachel Pupazzoni
Well the RBA certainly was the topic of discussion today all over Australia.
My team and I went in to today pondering what the central bank would do: 50, 25, zero percentage point increase? Like most others, we were expecting 25.
But we now also know the Bank has indicated it isn't about to pause, just yet.
These famous last words from the statement are telling.
"The Board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary."
The market ended lower after that pointer to more pain on the way and the dollar rose.
As we digest all this, can I suggest you catch our program The Business on your TV tonight (8.45pm AEDT on the ABC News Channel and after the late news on your local ABC TV - best to check your local guide) as my colleagues will analyse what today's rate rise means.
And if you want even more, don't forget to check out our special RBA blog.
Thanks for coming along for the ride with us all today - it's been great to read your comments - keep them coming.
Why did the market fall on the rate rise?
By Michael Janda
Why did the market fall today if a 0.25% interest rate hike was expected?
- Andrew
Good question Andrew.
The ASX 200 lost more than 40 points, or a little more than half a per cent, on the back of the RBA decision.
As is often the case though, it wasn't the amount of the RBA's move (0.25 of a percentage point), which was widely expected, that triggered the fall.
Instead it was Philip Lowe's post-meeting statement.
In particular his reference to expecting further interest rate "increases" to be needed "over the months ahead".
Prior to the meeting, market pricing had suggested a peak cash rate of 3.6 per cent.
We're already at 3.35 per cent, so that means at least two more 'normal' 0.25 percentage point rate increases would take the cash rate to 3.85 per cent or above.
The expectations of a higher peak interest rate is what sent the ASX down and the Australian dollar a little bit higher.
Just how steep are the interest rate rises?
By Michael Janda
There's a saying on financial markets that prices generally go up by the stairs and down by the elevator.
At the moment, the opposite is true for interest rates.
This is what the steepest rate increases in modern Australian economic history look like.
RBA more hawkish
By Gareth Hutchens
A few economists have pointed out how hawkish the RBA's statement is today.
They say the final paragraph of the RBA's statement is crucial:
The Board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary. In assessing how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending 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.
It's like the RBA's board members have come back from their summer break with some urgency to keep lifting rates.
Treasurer discusses the rate rise
By Michael Janda
Jim Chalmers addressed Parliament seconds after the latest rate rise announcement was made by the RBA.
"Each of these interest rate rises, which began before the election, have put extra pressure on Australians and have put extra pressure on the Australian economy as well," he told Question Time.
"And I think we understand in this place, certainly the Australian community understands, that the Reserve Bank makes these decisions independently, and it's not our job in this place to interfere or to second guess their decision making, or pressure them in any way.
"It's our job to focus on the broader pressures that are coming at us from around the world, and being felt around the kitchen tables of this country."
What's being said about the RBA's ninth rate rise
By Rachel Pupazzoni
My inbox is starting to fill up with commentary from economists about the RBA's increase to the cash rate, so I thought I'd share a few with you.
Sean Langcake, head of macroeconomic forecasting for BIS Oxford Economics wrote:
"The RBA board eschewed a surprise move in February. The two-month break in between meetings means there was plenty of new data for the RBA Board to mull over.
"Inflation appears to have peaked, but the RBA's main concern will be for how long inflation remains above the target range, and whether this overshoot feeds into inflation expectations.
"Today's statement is not an especially dovish one and we expect another rate hike in March is all but certain."
Marcel Thieliant, Capital Economics' senior Japan, Australia & New Zealand economist noted:
"We're sticking to our forecast that the Bank will lift the cash rate to an above-consensus 3.85% by April.
"The Bank left its inflation forecast for this year unchanged at 4.75% and it today published forecasts for June 2025 for the first time.
"The latter show that the Bank still expects inflation to be at the top end of its 2-3% target band two years ahead.
"Perhaps most importantly, the Bank reiterated that its "priority is to return inflation to target".
"It underlined that commitment by noting that if inflation were to become entrenched in people's expectations it would be "very costly" to reduce later."
The Housing Industry Association's chief economist, Tim Reardon wrote in his note:
"A return to stable economic growth will not be achieved by putting the housing sector through boom-and-bust cycles.
"Lending for new homes is down by 62.4 per cent since its peak in January 2021, to its lowest level since November 2012. Sales of new homes have stalled in recent months as market confidence declines.
"This poor data is as a consequence of the fastest increase in the cash rate in a generation. Despite this, the impact of last year's rate increases won't be fully apparent until late this year.
"The decision by the RBA to increase rates further in 2023, will further erode market confidence and accelerate the downturn that is already evident."
Philip Lowe's use of a plural is quite telling
By Michael Janda
As with the US Fed recently, the presence of an "s" at the end of "increase" has economists and traders scurrying to upgrade their rate forecasts.
The market had expected the RBA to stop at 3.6 per cent but, given the cash rate is now 3.35 per cent and governor Philip Lowe has said he expects further rate increases will be needed, that suggests the peak cash rate could be higher.
If borrowers worried about rising rates wanted some hope out of Mr Lowe's statement, it is that those rate rises might be spread "over the months ahead", which leaves open the possibility of a pause next month if the RBA wants to wait and see a bit more data about the economy before pulling the trigger again.
AUD responds to interest rate hike
By Rachel Pupazzoni
For those who prefer a visual cue, here's a chart showing what the dollar has done today. Check out that jump up after the RBA news came through!
There's another RBA blog!
By Rachel Pupazzoni
My colleagues from our digital team have another blog going this afternoon looking at the RBA's rate hike to 3.35 per cent.
You can check it out here - but don't forget about us too :)
Dollar jumps on back of rate rise
By Rachel Pupazzoni
The Australian dollar jumped on the back of the RBA's rate increase.
About 10 minutes before the announcement, it was trading at 69.17 US cents.
Fifteen minutes after the RBA news came through, the AUD is worth 69.38 US cents.
Equities went the other way.
The ASX 200 is down 0.49 per cent to 7,502 points and the All Ordinaries is down 0.45 per cent to 7,710 points.
More rate rises to come
By Rachel Pupazzoni
The RBA doesn't look like it's about to stop raising rates.
In the last, and often most telling, paragraph of the board's statement, it noted the following (again, bold is by me, not the RBA):
"The Board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary. In assessing how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending 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."
What the RBA said after hiking the cash rate again
By Rachel Pupazzoni
As you digest a ninth cash rate increase, here's a little of what was in the RBA board's statement.
I've made some things bold so you can spot them easily - that emphasis is not from the RBA statement.
"At its meeting today, the Board decided to increase the cash rate target by 25 basis points to 3.35 per cent. It also increased the interest rate on Exchange Settlement balances by 25 basis points to 3.25 per cent.
Global inflation remains very high. It is, however, moderating in response to lower energy prices, the resolution of supply-chain problems and the tightening of monetary policy. It will be some time, though, before inflation is back to target rates. The outlook for the global economy remains subdued, with below average growth expected this year and next.
In Australia, CPI inflation over the year to the December quarter was 7.8 per cent, the highest since 1990. In underlying terms, inflation was 6.9 per cent, which was higher than expected. Global factors explain much of this high inflation, but strong domestic demand is adding to the inflationary pressures in a number of areas of the economy.
Inflation is expected to decline this year due to both global factors and slower growth in domestic demand. The central forecast is for CPI inflation to decline to 4¾ per cent this year and to around 3 per cent by mid-2025. Medium-term inflation expectations remain well anchored, and it is important that this remains the case.
The Australian economy grew strongly over 2022. The central forecast is little changed from three months ago, with GDP growth expected to slow to around 1½ per cent over 2023 and 2024. The recovery in spending on services following the lifting of COVID restrictions has largely run its course and the tighter financial conditions will constrain spending more broadly.
The labour market remains very tight. The unemployment rate has been steady at around 3½ per cent over recent months, the lowest rate since 1974. Job vacancies and job ads are both at very high levels, but have declined a little recently. Many firms continue to experience difficulty hiring workers, although some report a recent easing in labour shortages. As economic growth slows, unemployment is expected to increase. The central forecast is for the unemployment rate to increase to 3¾ per cent by the end of this year and 4½ per cent by mid-2025.
Wages growth is continuing to pick up from the low rates of recent years and a further pick-up is expected due to the tight labour market and higher inflation. Given the importance of avoiding a prices-wages spiral, the Board will continue to pay close attention to both the evolution of labour costs and the price-setting behaviour of firms in the period ahead."
RBA hikes cash rate another 0.25%
By Rachel Pupazzoni
Well, they've done it.
Just as many thought they would, the RBA has lifted the interest rate another 0.25 of a percentage point.
It takes the cash rate to 3.35 per cent.
It's the highest level its been since September 2012.
The average variable mortgage rates now top 6 per cent.
The increase adds a further $114 a month to repayments on a $750,000 home loan, taking the total increase in mortgage costs to $1,362 a month for such a borrower since rates started rising in May last year.
Queensland's property market
By Rachel Pupazzoni
Why are there so many distressed listings in QLD compared to VIC and NSW? There's more than both states combined.
- Matt A
Hey Matt A, thanks for your question.
Queensland is a state with a pretty volatile property market.
It's property values fell 1.4 per cent in January, according to CoreLogic data - the second highest monthly price decline among the capital cities.
You might have also noted in the SQM chart in my earlier blog post, that while Queensland and Western Australia had the highest number of distressed sales in January, they also posted the biggest percentage fall in distressed sales.
Queensland was down 4.4 per cent from December to January and WA was down 4.8 per cent.
It was those falls that really pulled the national average down.
You might be interested to read this story by my Brisbane newsroom colleagues Jessica Black and Emma Pollard from last week.
Cheap meat: have you considered mutton?
By Rachel Pupazzoni
Paying for a basket of groceries is costing a lot more, but my colleagues at ABC Rural might have an answer for you.
Mutton.
Mutton is meat from sheep that were two or three years old - a little too old to call lamb.
It's great in stews apparently.
What's also great, the price of mutton is back to what it was in 2016 because the number of older sheep in the saleyards is booming.
According to MLA data, there were 165,364 ewes offered in Australia's saleyards in the first four weeks of 2023 — up 78 per cent (or 78,000 head) on the same time last year.
Read more about this story by my colleagues Cara Jeffery, Amelia Bernasconi and Joshua Becker.
Who has it worse when it comes to buying a home and paying it off?
By Rachel Pupazzoni
It's the question that gets us all a little sensitive: Did Boomers have it harder than Generation X or Millennials when buying a house - or is it harder now?
Full disclaimer, I'm just on the cusp of being a Millennial - so you might guess my response ;)
But my colleague Nassim Khadem has looked into this properly and spoke to the experts.
Check out her story.
RBA rate hikes are good news for savers
By Rachel Pupazzoni
While we wait for news from RBA HQ in Sydney's Martin Place, I thought I'd share this interesting stat about savers.
According to comparison website, Finder, 64 per cent of savers don't know their interest rate.
While we talk a lot about rising interest rates on mortgages, banks also tend to pass on some or part of the RBA's cash rate increase to saving accounts.
If you're trying to build your cash for a holiday, home deposit, rainy day – that's good news!
According to Finder's Consumer Sentiment Tracker, the average Australian has $38,290 in cash savings.
After the RBA's eight hikes last year, some high interest saving accounts now offer an interest rate starting with a four.
*opens bank account to check savings rate*
Homes are being sold as distressed borrowers face higher interest rates
By Rachel Pupazzoni
We're a couple of hours away from hearing if the Reserve Bank of Australia (RBA) will deliver another hike to the official cash rate, and some borrowers are already feeling the pinch.
SQM Research has released some data that shows a 3.6 per cent jump during the past 12 months in the rate of distressed listings across the country.
Though you'll note the 3.0 per cent fall in the month from December to January.
Nonetheless, 6,018 homes were sold under distressed conditions in January. That means people had little choice but to sell their home. Of course, we don't know why, there are many reasons people may need to sell quickly, some may have been because they could no longer afford their mortgage repayments.
It's worth pointing out, 5,812 homes were sold under distressed conditions in January last year. So only about 200 more in January this year.
SQM's Managing Director Louis Christopher isn't worried about the rate of distressed sales.
"There are very few forced sellers out there as our distressed listings index reveals, which indicates, thus far, a market under no great stress.
"This is one of the reasons why I am a little more optimistic than my peers that, provided the cash rate does peak below 4 per cent, the market will bottom and start to recover from middle of this year."
The RBA has jacked up the official cash rate by 3 per cent to 3.1 per cent and that's added thousands of dollars to people's repayments since the hiking cycle began in May 2022.
The RBA will announce its latest decision on rates at 2.30pm AEDT today and my colleagues and I will bring you that news and analysis this afternoon.
RBA meeting today
By Rachel Pupazzoni
Hi Rachel, et al. That's welcome news on health insurance premiums.Now we just need a good outcome from the Reserve Bank board meeting today!
- NIB member + ASX & Business News blog fan
Great to hear from you NIB member + ASX & Business News blog fan!
We're so pleased you're enjoying the blog.
The business team is all waiting with bated breath too, to see just what the RBA decision will be.
At the board's last meeting (in December) we know they considered three options, here's an excerpt from the minutes:
"The Board considered several options for the cash rate decision at the December meeting: a 50 basis point increase; a 25 basis point increase; or no change in the cash rate."
