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

Higher wages needed for rate increase…

| More on:
A businessman pushes a giant percentage sign down, indicating eforts to keep inflation in check

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Should you invest $1,000 in Resapp Health right now?

Before you buy Resapp Health shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Resapp Health wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

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.

More on Economy

A happy shopper lifts her bags high, indicating a rising share price in ASX retail companies
Economy

The latest retail sales data is out: What did it reveal about the Australian economy?

Retail sales data is a closely watched metric by investors and economists.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
Economy

1 month on from Trump's Liberation Day. What's the latest with Trump's tariffs?

A lot has changed in one month.

Read more »

Man putting a ballot into a voting box in Australia.
Economy

Federal Election Eve: How does Macquarie expect markets to respond to the result?

Will the market go on a tear like the recent US Presidential election?

Read more »

A worried woman looks at her phone and laptop, seeking ways to tighten her belt against inflation.
Economy

US economy reports negative GDP growth in Q1. What does this mean?

The US is now halfway to a recession.

Read more »

A young man goes over his finances and investment portfolio at home.
Economy

Is Australia's AAA credit rating at risk?

S&P Global Ratings issued a statement earlier this week.

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Share Market News

What the latest inflation data means for ASX 200 investors and RBA interest rate cuts

Will ASX 200 investors enjoy a May RBA interest rate cut following the latest inflation print?

Read more »

Magnifying glass on a rising interest rate graph.
Economy

How likely is a 50 basis point interest rate cut next month?

What are experts tipping for next month's RBA meeting?

Read more »

Man smiling at a laptop because of a rising share price.
Share Market News

Why is the ASX 200 roaring higher today?

ASX 200 investors have good reason to celebrate today.

Read more »