Today looks set to be a nerve-wracking day for Australians with two major events taking place. These are of course the Melbourne Cup and the Reserve Bank's cash rate meeting.
Which horse will reign supreme at Flemington, and will the central bank break the hearts of homeowners by taking interest rates to 4.35%?
The Chief Investment Officer of Viridian Financial Group, Piers Bolger, has given his verdict on both events and you may not like what he has to say.
Melbourne Cup and RBA cash rate predictions
Firstly, if you're betting on anything but the favourite at the Melbourne Cup, Bolger thinks you may be leaving Flemington disappointed.
The Chief Investment Officer revealed that the team at Viridian Financial Group "believe Irish eyes will be smiling with Vauban."
However, those smiles may be short-lived if they have a mortgage here in Australia. That's because Bolger is confident that the RBA will be forced to increase the cash rate on Cup Day. He said:
While we believe Irish eyes will be smiling with Vauban, we don't see the same locally with expectations that the RBA will need to increase the cash rate by a further 0.25% to 4.35%. The recent CPI print continues to show that inflationary pressures remain elevated with few signs of a material contraction.
While the RBA has indicated its decision will be based on inflation moving back towards its 2-3% target by the 4Q25, with the current policy rate well below that of other central banks and few signs that prices are likely to decline in the near term, we believe further action will be required. It sets the scene for a challenging lead in to Christmas spending period.
As things stand, the RBA cash rate futures continue to point to a 50% probability of an increase in interest rates today. This could potentially mean the ASX 200 index has a few wobbles later if the RBA makes a move.
