January 2025: Holding at 4.35 per cent

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The RBA held the cash rate steady at 4.35% throughout the quarter, maintaining a restrictive monetary stance. Despite speculation of a February rate cut, RBA Governor Michele Bullock emphasised that inflation must be sustainably within the desired target of 2-3% before monetary policy is eased. The monthly CPI remained flat at 2.1% year-over-year in October, supported by government energy subsidies and rental assistance. Strength in the labour market, with unemployment falling to 3.9% in December, further dampened expectations for an early 2025 rate cut.

The AUD has taken a hit, dipping below 62 US cents, a level not seen since October 2022. A strong USD, fuelled by hawkish Federal Reserve policies and uncertainty surrounding the incoming US administration compounded the AUD’s decline. Expectations of an impending rate cut by the RBA could further pressure the currency, posing challenges for inflation management.

Meanwhile, the US Fed delivered its third consecutive rate cut, setting the policy rate at 4.25-4.5%. Despite this easing, the Fed’s tone was hawkish, signalling a more cautious approach to further cuts in 2025. As a result, US equities faltered as markets recalibrated expectations for looser monetary policy. It’s been an otherwise strong end to the year for equities, led by a US market surge following the Republican Party’s pro-growth electoral victory. Deregulation and potential corporate tax cuts drove optimism, lifting valuations. Domestically, Australian equities saw modest gains, with the All-Ords (ASX500) closing near record highs.

Heading into the new year, investors are watching key developments: the RBA’s next move, US policy adjustments under the new administration, and upcoming inflation data, which will shape central bank strategies.

Returns for the 2025 Financial Year (6 months)

All Ordinaries: 8,420.50, up 406.70 points, or 5.08%
Listed Property Accumulation Index: 77,783.90, up 5,316.6 points or 7.34%
90 Day Bank Bills: 4.42%, down 0.03%
AUD vs US Dollar: 61.85c, down 4.88c or 7.31%
UK FTSE 100: 8,173.02 points, up 8.90 points or 0.11%
Dow Jones Industrial Avg: 42,544.22 points, up 3,425.36 or 8.76%

Guardian Investments Pty Ltd ABN 18 608 506 261 is a Corporate Authorised Representative of Guardian Associates Pty Ltd AFSL 238281. This page reproduces commentary published in January 2025 and is general advice only. It has not been tailored to your objectives, financial situation or needs, and the figures were current at the time of writing. Past performance is not a reliable guide to future returns. Seek personal financial advice before acting on it.