12-year high
The Reserve Bank of Australia hiked the cash rate target from 4.10% to 4.35% today, taking the rate to a 12-year high.
Interestingly, the S&P/ASX 200 (INDEXASX: XJO) saw the modest shifts in language as reflective of a good deal of uncertainty about household cashflow stress and the need for any further policy tightening.
Perhaps most notably, there was a change in wording from ‘some’ to ‘whether’ further tightening is required.
That having been said, hikes often come in pairs or back to back – a bit like London buses – so we’ll have to see what the next month of data brings.
Australia’s 3-year bond yield is trading at around 4.18 per cent, which is a bit below where it was in early July, and more than 25 basis points lower than recent highs.
The Aussie dollar also fell back a little from 64.9 US cents this morning to 64.4 US cents after the release.
Although Westpac Banking Corp‘s (ASX: WBC) results release yesterday showed a relatively low rate of 30+ day mortgage arrears, as expected there has been a gradual increase in stressed exposures, and some lenders may offer discounts to households in severe mortgage stress.
