It comes just one month after the RBA lifted rates by 0.35% – bringing the national cash rate to 0.85%. And more hikes could be on the cards for coming months.
The CEO of industry body National Retail Association described the RBA’s decision – likely to hit consumers in the pockets and weigh on retailers’ bottom lines – as “heavy-handed”.
The ASX 200 plunged 1.53% on Tuesday. Meanwhile, the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) tumbled 2.34%.
ASX 200 retail shares slump following RBA decision
Retail-focused conglomerate Wesfarmers Ltd (ASX: WES)’s stock slumped 3.8%.
RBA governor Philip Lowe noted inflation in Australia is lower than in other advanced economies but higher than was previously expected.
Many factors making headwinds for ASX 200 retailers – COVID-19 and supply chain issues – also drove inflation this year.
But National Retail Association CEO Dominique Lamb is dubious that such a hike was necessary.
She called the RBA’s decision “heavy-handed”, saying the regulator moved too fast to increase interest rates.
“Many retailers are watching consumer confidence rapidly slipping [amid] a raft of increasing costs and external factors such as the cost of fuel, power … increasing wages, and supply chain issues,” Lamb told The Motley Fool Australia. She continued:
Interest rate rises in quick succession impacts the willingness of consumers to spend and invest in their homes and [they will] shrink their basket sizes.
At the end of the day, many retailers are hanging on and this could be the last straw.