ASX set to fail, ahead of Reserve Bank’s likely interest rate hike of 0.5 per cent – Michmutters

ASX set to fail, ahead of Reserve Bank’s likely interest rate hike of 0.5 per cent

Australian shares are set to open lower, ahead of the Reserve Bank’s widely-expected interest rate hike this afternoon which will lead to another sharp rise in mortgage repayments.

ASX futures were down 0.3 per cent, to 6,880 points, by 8:25am AEST.

The Australian dollar was trading at a six-week high of 70.2 US cents, following a 0.6 per cent rise overnight.

According to many Australian economists, the most likely outcome of today’s RBA announcement will see the central bank lift it cash rate target by a larger-than-usual 0.5 percentage points.

This would take the new rate to 1.85 per cent, a big jump since the record low of 0.1 per cent in May. It would also be the highest cash rate since April 2016.

The central bank is expected to keep lifting rates aggressively over the coming months, as it desperately tries to bring inflation down from its 21-year high.

Effectively, it will do so by lifting rates to a level that makes consumers feel poorer so they visit the shops less, and spend more on their loan repayments.

House prices are also feeling the crunch. Since interest rates begin to rise sharply in May, property values ​​have dropped by 2 per cent — the fastest drop since the onset of the global financial crisis in 2008, according to figures from CoreLogic.

‘A lot of questions’ about the economic downturn

The local share market is also likely to follow a weak lead from Wall Street, which we see-sawed on Monday, local time, as crude oil prices plunged and the looming possibility of US recession curbed the appetite for taking risks.


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