Insights

ASX share market fears ease as RBA’s inflation target proves difficult to hit

Higher wages needed for rate increase…
The post ASX share market fears ease as RBA’s inflation target proves difficult to hit appeared first on The Motley Fool Australia. –

The S&P/ASX 200 Index (ASX: XJO) has quickly bounced back as investors buy up ASX shares following a speech from the RBA Governor this morning.

Philip Lowe discussed the economy’s transition from recovery to expansion phase at the Australian Farm Institute Conference in Toowoomba.

While there was plenty of information, the market had its ears on the governor’s commentary around inflation.

Stubborn inflation

In his speech, Lowe discussed what the future may look like as the Australian economy takes its next steps forward.

Although employment is now 1% above pre-COVID levels and GDP growth has rebounded strongly, the governor insisted that it’s important not to lose sight of the challenges being faced.

While unemployment has retreated, wage growth continues to remain elusive. Lowe noted that the RBA had not seen any serious movement in wages or inflation despite improvements in economic data.

Reportedly, businesses have felt as though increasing prices is not an option due to the competitive environment. As a result, the focus had instead shifted towards cost-cutting to achieve increased profits.

This mindset can be helpful in making businesses more efficient, but it also has the effect of making wages and prices less responsive to economic conditions.

Investors are breathing a sigh of relief following the RBA’s comments. In contrast, the US Federal Reserve last night found that inflation had come in ahead of expectations in the last few months. The remarks sending warning signals across equity markets.

Fuel for ASX shares

Today’s speech continues the RBA’s position on maintaining a low-rate environment until early 2024, at the earliest. This gives added confidence in equities, as borrowing for leveraged investments remain low and the return on cash remains unattractive.

ASX-listed tech shares have particularly gained a boost out of today’s dovish comments. At the time of writing, the information technology sector is 1.08% higher.

The post ASX share market fears ease as RBA’s inflation target proves difficult to hit appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

More reading

Are crashing ASX mining shares an opportunity or a disaster to run from?

Here are the 3 most active ASX 200 shares today

Did the US Federal Reserve just ring the inflation warning bell?

ASX 200 down 0.3%: Coles and Challenger updates, gold miners sink

5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!