The S&P/ASX 200 Index (ASX: XJO) is off to a smashing start in the New Year.
How smashing?
From the closing bell on 30 December, the benchmark index is up an impressive 5.9%.
It's done even better in the calendar year. Since the opening bell on 3 January, the ASX 200 has soared a remarkable 7.3%, closing on Friday at 7,452.2 points.
That puts the basket of the 200 largest listed Aussie companies within 2.4% of the all-time high of 7,632.8 points. That peak was hit in mid-August 2021.
So, will the ASX 200 notch a new high-water mark this week?
Here's what to watch.
Will the ASX 200 break into new record territory this week?
The biggest drag on stocks last year was fast-rising interest rates.
On 6 April 2022, the official cash rate stood at a rock bottom 0.10%.
But faced with rocketing inflation, the Reserve Bank of Australia (RBA) delivered eight consecutive interest rate hikes from there, leaving the current cash rate at 3.10%. The increased cost of money saw the ASX 200 fall by 6.1% from 6 April through to 30 December.
But now signs are emerging that inflation may be approaching its peak. And that, in turn, means the RBA may not need to continue with its aggressive tightening policy.
While the consensus view still believes the central bank will lift rates by another 0.25% when it next meets on 7 February, investors are increasingly confident that this may be the last interest rate boost we see.
Which is why Wednesday's CPI figures could help send the ASX 200 to new all-time highs. That is, of course, if inflation does appear to be coming off the boil.
What the experts are saying
AMP's chief economist, Shane Oliver, believes the RBA should hold off on more hikes in light of the latest jobs and inflation numbers.
"The monthly jobs and inflation data are consistent with the RBA pausing," he said (quoted by The Australian Financial Review). "But the strength of retail sales as indicated by the ABS for November and from corporate reports suggests a still high risk of another 0.25 percentage point hike in February."
Senior economist at ANZ Group Holdings Ltd (ASX: ANZ) Felicity Emmett also leans towards a likely rate increase next month, depending on Wednesday's CPI data.
According to Emmet:
The fourth-quarter inflation data will be a critical input into the RBA board's February deliberations. It would take a solid downside surprise in underlying measures of inflation for the [RBA] to consider a pause in hiking.
If I may take the liberty of speaking for ASX 200 investors, here's to hoping Wednesday's inflation figures come in with that solid downside surprise.
