ASX Likely to Rise, Reserve Bank Prepares to Raise Rates as European Markets Fall

Local stocks could start the day higher, despite heavy losses in European markets overnight and a much-anticipated interest rate hike by the Reserve Bank of Australia (RBA).

ASX futures were up 0.1 percent at 6,840 points at 6:45am AEST while Wall Street was closed for a public holiday.

The Australian dollar fell to 67.97 US cents, around a seven-week low against the dollar.

Many economists are predicting that the RBA will raise its cash rate target by 0.5 percentage point. This would take the new cash rate to 2.35 percent, its highest level since December 2014.

With inflation rising at its fastest pace in roughly 30 years and wages struggling to keep up, the RBA has very little choice but to raise rates. It’s also under pressure to slow the economy without causing businesses and households too much pain.

A person with a $500,000 adjustable-rate mortgage and 25 years left to pay it off will see their monthly payment increase by about $140, according to comparison website RateCity.

However, when one considers the impact of five rate increases, including today’s, that borrower would have to shell out an additional $600 per month.

European shares fall after closure of Russian gas pipeline

European stock indices fell overnight, while the euro fell below 99 cents for the first time in 20 years after Russia said its main gas pipeline to Europe would remain closed indefinitely.

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