Inflation still running hot - what does this mean for Aussies' portfolios?

By Gaby Rosenberg (pictured), Co-Founder & CEO, Blossom

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Inflation has been persistent all year. This quarter’s CPI figure increase of 1% is an indicator that the RBA may need to move to increase rates in Q3. The RBA has been aiming for inflation to be back within a 2-3% target range by the end of the year. Since we’re still over that figure at the end of Q2, the RBA may need to act swiftly to bring this down, which could include at least one more rate rise before the end of the year.

Hot rates cool property and equities 

Another rate rise could lead to more pressure on not just mortgage holders as intended but businesses with a significant amount of debt and this may impact growth equities in an investment portfolio. A change in rates with the unknown reality of when CPI will come down could bring some market volatility in asset classes like property and equities.

The silver lining in a higher cash rate

The reality is these rate rises may benefit retirees or investors who have exposure to fixed income and interest bearing products. Where there is drop in performance in some areas of the market, there are opportunities in others. Bonds have been a staple in the investment portfolio for centuries as it’s seen as a flight to safety during volatile times.​

With the latest CPI numbers increasing this quarter, fixed income may offer the stability and predictability that the equity markets currently lack.