RBA pause - investors to back tech growth stocks
- Written by Dylan Zhang
“Today’s pause comes as welcome news to investors, but it’s unlikely this will be the last hike of the cycle. Rather than signalling that the inflation fight is over, this pause buys the RBA time to assess the upcoming quarterly CPI data on April 25 and the full impact of the banking crisis in Europe and the US.
Last week’s monthly CPI came out below expectations at 6.8%, and while inflation appears to have peaked, this is still above the target band of 2-3%. Inflation is cooling, but there’s more work needed to prevent it becoming entrenched. That said, it appears the RBA expects credit conditions to tighten due to the pressure on global banks, which could shorten the hiking cycle and lower the terminal cash rate.
Given how the RBA’s peers in the U.S. and U.K. lifted rates in recent months, today's move may be seen as a sign of fragility in the Australian economy, potentially leading to a weaker Australian dollar and subsequent inflationary pressure from imports and energy prices. However, Australia is particularly sensitive to rates due to a high percentage of people on variable mortgages, so hikes may have a bigger impact when compared to other markets.
Following this announcement, investors will be watching the impact of the OPEC+ production cuts and China’s recovery, which are causing the price of oil to surge, potentially leading to higher costs across transport, food, and travel. Given the uncertainty over recent weeks, we’ve seen investors on Stake increase their allocation to passive index funds and gold ETFs. But as the pace of rate hikes appears to be slowing, it’s likely we’ll see more investors moving back into tech growth stocks.”
Dylan Zhang, ASX Equities Analyst at online brokerage platform, Stake
