The Reserve Bank of Australia (RBA) lifted interest rates to 4.35%. Meanwhile, the US Federal Reserve and European Central Bank left rates unchanged. Central banks signal ‘higher for longer’ environment. Australian shares trading higher.


What's happened recently?

  • The Reserve Bank of Australia (RBA) delivered an expected rate hike of 25 basis points to 4.35% on 7 November
  • The US Federal Reserve (Fed) chose to hold rates steady, as economic activity expanded at a strong pace in Q3
  • The European Central Bank (ECB) halts rate hikes after 10 consecutive increases
  • Geopolitical events add to global market dynamics.

Why did these things happen?

The Reserve Bank of Australia (RBA) increased interest rates by 25 basis points to 4.35% from 4.10%, following a four-month-long pause. A rate hike was likely on the cards from the for its 7 November decision, based on the board’s previous minutes stating its concerns that inflation “is still too high and will remain so for some time yet”. This also came on the back of higher-than-expected inflation data two weeks ago. Not sure why the RBA is still lifting interest rates? Read our quick explainer to learn more


As market experts expected, the US Federal Reserve (Fed) kept rates on hold at its current range of 5.25% to 5.50% on 1 November, due to the encouraging results already seen from its tightening policy and economic data.


The European Central Bank (ECB) made its monetary policy decision on 26 October and left interest rates unchanged at the range of 4% – 4.75%, halting after 10 previous consecutive hikes. The decision was announced amid concerns of a recession and the added risks from the conflict in the Middle East. ECB President, Christine Lagarde, stated that this was not a sign of more rate cuts to follow. The eurozone’s inflation has eased to around 3.1% in October, falling from 4.3% the previous month.


Need a refresher? Here’s what happened in markets back in SeptemberAugust and July.

Is there good news?

The first week of October saw Australian shares trading higher and maintained an upward price streak as the new month rolled in.


The population also continues to grow and support economic activity, while the government’s migration strategy is targeting highly skilled talent. Overall, inflation is finally coming down, albeit slowly, the labour market remains strong, and the economy is operating at a high level of capacity utilisation – this relates to our full production potential.


There are renewed expectations for electricity prices to fall, although energy relief may not be until next financial year.

What could lie ahead?

It’s referenced a lot on the news as key central banks have signalled what’s to come, but what does ‘higher for longer’ mean?


The concept refers to keeping interest rates higher for longer when compared to previous high inflation periods than we are generally used to . So even after a central bank ends its rate hiking cycle, interest rates will have to remain higher than previously projected, in order to combat high inflation and bring the inflation rate down to its target rate.


Despite the challenges, some sectors, asset types and stocks can benefit from a high interest rate setting. Active investment managers are often finding these opportunities to leverage and add to portfolios for their investors, providing some cushioning during tougher periods.


In China, manufacturing dipped in October with the Purchasing Managers Index (PMI) decreasing from 50.2 in September to 49.5. A PMI result above the 50-point mark considers activity to be in growth or expansion. Since June, the country’s policymakers have announced drip-feed measures to help prop up its economy and these stimulus measures have continued. Some market experts have stated that China’s slowdown does not represent a significant threat to Australia since other markets now contribute to the local economic makeup – growth in the Australian economy was a little stronger than expected over the first half of 2023.


Adding to the global market dynamics is the increase in major geopolitical events, that is, political activity relating to geography, such as the conflict in the Middle East. We’ve unpacked what they mean in How do global events affect my super and investments?


As always, future rate decisions by the central banks will depend on what happens next with data alongside their assessment of risks, the economic outlook, global developments, and the view on inflation.

What should I do if I’m concerned about my investments?

If you’re wondering about whether you should make changes to your investments, we recommend connecting with your financial adviser to review your investment goals, identify any potential opportunities, and make changes if necessary. 


If you don’t have an adviser, you can find an adviser near you using our Find an Adviser service at Call us with any general queries on 13 13 36, Monday to Friday, 8:30am to 6pm Sydney time (+612 8397 1100 from outside of Australia).  

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