It's been a hump day for the record books this Wednesday. The S&P/ASX 200 Index (ASX: XJO) has shaken off the pessimism we saw last week to push decisively higher today, clocking a new all-time record high in the process.
Yesterday, the ASX 200 closed at 8,704.6 points after ticking up by 0.079%. But today, investors have an obvious spring in their steps. This morning, the ASX 200 did dip at open, but quickly recovered, climbing as high as 8,776.4 points just after midday. That's, you guessed it, a new intra-day record for the index.
At the time of writing, investors have cooled their jets a little, but even so, the index remains up a comfortable 0.7% at just over 8,765 points.
Today's gains cap off what has been a fantastic year so far for Australian investors. At present, the index is now up a healthy 6.8% or so in 2025 to date. That gain stretches to 10.1% over the past 12 months. The ASX 200 is also up more than 19% since the lows we saw in early April following the 'Liberation Day' tariff announcements out of the United States.
Check it out for yourself below:
So why are ASX 200 investors in such a good mood this Wednesday? Well, it appears that the latest inflation numbers out from the Australian Bureau of Statistics (ABS) this morning are a big factor here.
As my Fool colleague covered this morning, these inflation numbers made for some easy reading. The ABS revealed that the consumer price index (CPI), which measures inflation through rising prices of everyday goods and services, rose by 0.7% in the June quarter (the three months to 30 June 2025). That puts the annualised rate of inflation at 2.1%.
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ASX 200 hits new record on falling inflation
That's well within the Reserve Bank of Australia (RBA)'s 2-3% target band for inflation. It's also well below the 2.4% rate recorded at the end of the March quarter.
As my colleague reported earlier today, Michelle Marquardt, the ABS' head of price statistics, stated that "This is the lowest annual inflation rate since the March 2021 quarter".
So why is this news pushing the ASX 200 to new records? Well, for one, it shows that inflation continues to return to where the RBA wants to see it, indicating a healthy economy. But it is also approaching the lower end of the RBA's target band, meaning the bank will almost certainly cut interest rates further this year.
The RBA has already cut interest rates twice this year, but surprised ASX 200 investors earlier this month by leaving rates on hold. Few are betting it will again stay its hand at the meeting next month. In fact, the ASX's RBA rate tracker tells us that, as of yesterday, investors were pricing in a 95% chance of a 25-basis-point rate cut next month. That might go even higher after today's news.
Lower interest rates are good news for the sharemarket. This is due to a variety of factors. For example, lower rates make alternative, safer investments like term deposits less attractive compared to ASX shares.
So it's this expectation of faster and perhaps deeper cuts to interest rates that looks to be behind today's fresh new record high for the ASX 200.
