At 2:30pm AEST, the S&P/ASX 200 Index (ASX: XJO) was up a slender 0.07%.
Then investors tuned into the latest interest rate announcement just released by the Reserve Bank of Australia (RBA).
In the minutes that followed, the ASX 200 pushed higher as investors celebrated the bank's decision to reduce the official cash rate. At the time of writing, the benchmark index is up 0.32%.
Now Aussie interest rates aren't coming back down to 0.10% any time soon. Or maybe ever.
As you may recall, that's where the official benchmark rate sat until 4 May 2022, when the RBA initiated its first post-pandemic hike. This saw the central bank lift the cash rate from the historic low of 0.10% to the still low 0.35% as long-absent inflation began to reemerge with a vengeance.
Fast forward to February this year, when the official interest rate still stood at 4.35%, and we saw the RBA deliver its first interest rate cut since November 2020.
The board held rates steady at its next meeting, then gave the ASX 200 investors another 0.25% cut on 20 May. This brought the official Aussie cash rate to 3.85%.
But no more.
Image source: Getty Images
ASX 200 lifts on RBA interest rate cut
Although widely expected, the ASX 200 is catching some welcome tailwinds after the RBA board decided to lower the cash rate target by 0.25% to the new 3.60% in a unanimous decision.
The board noted, "Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and potential supply closer towards balance."
June quarter trimmed mean inflation over the year declined to 2.7%, broadly meeting the RBA's expectations.
And in potentially good news for mortgage holders and ASX 200 investors alike, the RBA said, "Updated staff forecasts for the August meeting suggest that underlying inflation will continue to moderate to around the midpoint of the 2% to 3% range, with the cash rate assumed to follow a gradual easing path."
But don't bank on that just yet!
The RBA also highlighted the ongoing and elevated uncertainty in the world.
According to the board:
There is a little more clarity on the scope and scale of US tariffs and policy responses in other countries, suggesting that more extreme outcomes are likely to be avoided.
Trade policy developments are nevertheless still expected to have an adverse effect on global economic activity, and there remains a risk that households and firms delay expenditure pending still greater clarity on the outlook.
As in May, the forecasts assume that both effects weigh on activity and inflation in Australia for a period.
As for Australia's labour market, the RBA said that it still remains "a little tight", though conditions have eased further in recent months.
The board added that, "Wages growth has eased from its peak but productivity growth has not picked up and growth in unit labour costs remains high."
Looking ahead, the RBA stated:
The board will be attentive to the data and the evolving assessment of risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
With today's intraday boost factored in, the ASX 200 is up 13.6% since this time last year.
