The S&P/ASX 200 and the Australian dollar held steady after the Reserve Bank of Australia announced no change to the record low official cash rate of 0.1% after its second board meeting for 2022.
The ASX closed off the day's highs, up 0.7% at 7096.50 by the end of the day's trading. Prior to the announcement, the ASX 200 was trading 1% higher and had been up as much as 1.4% during the morning session. The Australian dollar was at US72.56c prior to the announcement and US72.50c just after and slightly stronger against the US dollar at US72.61c by the close of the ASX session.
The RBA continued to insist it was prepared to be patient on any change in the cash rate, with Governor Philip Lowe saying the invasion of Ukraine by Russia had created “a major new source of uncertainty”.
He noted that inflation in parts of the world had increased sharply due to large increases in energy prices and disruptions to supply chains at a time of strong demand. The prices of many commodities have increased further due to the war in Ukraine. Bond yields have risen over the past month and expectations of future policy interest rates have increased.
But he said that the Australian economy remains resilient and spending is picking up following the Omicron setback, adding that macroeconomic policy settings remain supportive of growth.
Unemployment is at a 14-year low of 4.2% and underemployment is also around its lowest level since 2008. The RBA's central forecast is for the unemployment rate to fall to below 4% later in the year and to remain below 4% next year.
Inflation has picked up more quickly than the RBA had expected, but remains lower than in many other countries. The central forecast is for underlying inflation to increase further in coming quarters to around 3¼ %, before declining to around 2¾% over 2023 as the supply-side problems are resolved and consumption patterns normalise.
The RBA Governor said the Board was committed to maintaining highly supportive monetary conditions to achieve its objectives of a return to full employment in Australia and inflation consistent with the target.
“The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. While inflation has picked up, it is too early to conclude that it is sustainably within the target range. There are uncertainties about how persistent the pick-up in inflation will be given recent developments in global energy markets and ongoing supply-side problems. At the same time, wages growth remains modest and it is likely to be some time yet before growth in labour costs is at a rate consistent with inflation being sustainably at target. The Board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve.”
Data from CoreLogic earlier in the day showed that Australian housing prices slowed sharply though February. Sydney recorded its first monthly fall since 2020. The property researcher's monthly index showed prices gained 0.6% nationally in February – the smallest gain since the pandemic boom in October 2020 and close to half the 1.1% increase in January.
Commonwealth Bank has sold a 10% stake in Bank of Hangzhou to Hangzhou Urban Construction & Investment Group and Hangzhou Communications Investment Group for $1.8bn. Shares closed more than 1% higher.
The NZX 50 closed up 1.8% and share markets in Japan, China, South Korea and Singapore are higher, Hong Kong is mixed.
US major equity market futures are mixed, with Nasdaq slightly down and SPX 500 and Dow edging higher. Gold and oil are up slightly, while Bitcoin is gaining.
The Aussie dollar is at US72.61c against the US dollar.
Bitcoin is $US43,305.
Gold is $US1905.22 an ounce.
Brent crude oil is holding around $US101.09 a barrel.
WTI crude oil is at $US97.84 a barrel.