The Australian share market continued its strong start to 2024, with the All-Ordinaries index gaining 2.4% for the month and closing at 8,153.70 points. The Australian dollar gained marginally over the month with 1 Australian Dollar buying 65.34 United States cents.
Global share market returns were positive in March, with the United States Dow Jones Index gaining by 2.1%, the London FTSE gaining by 4.2%, the Japan Nikkei 225 gaining by 1.4%, and the Hong Kong Hang Seng Index gaining by 0.4% for the month.
The Reserve Bank of Australia (RBA) board kept rates on-hold at 4.35% per annum in March, with the next meeting to consider rates to be held in early May.
Data released late in the month confirmed that the annual rate of inflation remained steady for the month of February at 3.40% (which was 0.10% lower than forecast). While this is a good sign that we are though this cycle of high inflation, the current rate is still high when comparing inflation over the past decade (as shown in the chart below).
Source: tradingeconomics.com
A sustained decrease in inflation is why many economists are expecting the RBA to cut rates as early as June this year. However, with the unemployment rate falling to 3.70% in February, the RBA may be cautious about cutting rates too early – despite the overall economy showing signs of weak economic growth.
With Australian shares piling on more than 17% in gains over the past 5 months, it would certainly appear that investors expect a pivot on interest rates to come sooner rather than later.
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This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation, and investment objectives.