The big four banks have moved quickly to pass yesterday’s 0.25% rate hike on to business and consumers in full.
The ANZ, Commonwealth and Westpac shifted within hours, with NAB the last to fold.
So far, only the NAB has agreed to pay it forward by lifting rates on some savings accounts.
The rate changes are to take effect from May 13.
Rate rises like cockroaches
As one UK economist recently put it, rate rises are like cockroaches, they tend to come along in groups.
The next ‘cockroach’ is expected at the RBA’s meeting next month, as we return to more normal post-pandemic fiscal conditions.
It’s fair to say that 2022 will see several more of these rises, with many economists expecting the cash rate to eventually settle around 2.5%, by which time the average highly geared Victorian mortgagee with a $650,000 home loan will be paying $1,000 more per month.
"Not about politics"
Prime Minister Scott Morrison was quick to shirk all responsibility for the rate rise. The PM told a press pack the rate rise wasn’t about politics, and that he doesn’t see everything through a political lens.
Alternative treasurer Jim Chalmers said the government had to take responsibility for stagnant wage growth, which means the rate rise will hit harder.
“This is another aspect of Scott Morrison’s triple whammy in his cost-of-living crisis, falling real wages, rising interest rates and inflation spiralling out of control,” he said yesterday.
RBA governor Philip Lowe said that while inflation was being pushed up by external factors, issues in the Australian economy had contributed to the rise.
“Domestic capacity constraints are increasingly playing a role and inflation pressures have broadened, with firms more prepared to pass through cost increases to consumer prices,” he said.
Stock markets choppy but trending up
In the US, all eyes are on the Fed, which is expected to raise rates again tomorrow. Markets in the US rose weakly overnight, as investors picked up tech and financial stocks ahead of the predicted rate rise.
The Dow Jones index rose 0.2% to 33,129, the S&P 500 0.5% to 4,176, while the Nasdaq rose to 12,564.
Europe saw a similar trend – in London, the FTSE 100 rose 0.2% to 7,561, the DAX in Germany rose 0.7% to 14,039 and the CAC 40 in Paris rose 0.8% to 4,932.
The ASX is expected to open sharper this morning, with the ASX SPI 200 index up 0.6% to 7,328 at 7:50am AEST. The dollar fell following a jump on the news of yesterday’s rate rise.
Winners and losers
ANZ’s half-year net profit increased by 20% from the same time last year to $3.5 billion.
Shares in BP rose 5.8% as the company boosted its share buyback program after net profit soared to its highest in more than a decade.
Cosmetic brand Estee Lauder’s shares fell by 5.8% after it cut its full-year profit forecast, while Hilton Worldwide Holdings forecast a bleak full-year profit, causing shares to fall 4%.
Global oil prices fell by around 2.5% yesterday as concerns about weaker demand from a locked-down China continued, offsetting the broader context of a European embargo on Russian crude.
Base metal prices were flatter generally – aluminium lost 5.2%. Iron ore futures were down, as were nickel, copper, silver and gold.