The market's focus will be on Commonwealth Bank of Australia (ASX: CBA) today ahead of the Reserve Bank of Australia's decision on interest rates later this afternoon.
At 2:30pm Sydney time, the RBA will announce whether it will reduce rates by 25 basis points, as it is expected to do, or if they will remain unchanged for another month (of course, there's always the possibility they will raise interest rates, although the chance of that happening is extremely slim).
Given its status as one of Australia's most widely held and 'safest' dividend stocks, it is highly likely that Commonwealth Bank of Australia's shares will respond based on whatever direction the Board decides to take, just as it has done over the last two months.
On 3 February (when the Board decided to cut rates for the first time in 18 months), the stock rose 0.8% before surging another 3.2% over the next two days. On 3 March on the other hand (when the Board unexpectedly left rates unchanged), the stock retreated 0.7% before retreating a further 1.5% in the four days following.
As it stands, the market is pricing in another official interest rate cut, with rates set to fall to a record low 2%. With Commonwealth Bank of Australia's shares currently changing hands for $94.40, there's a very real chance the stock could climb to a record high price in the coming weeks. Right now, it's just 2.4% away from that achievement, and just 5.6% away from cracking the $100 mark for the first time in history.
Should you buy Commonwealth Bank?
Regardless of what happens in the coming weeks or months however, investors need to remember just how expensive the bank stock has become. In their search for solid dividend yields, investors have pushed the stock to never-before-seen heights which do not represent good value for long-term investors.
