RBA Hikes Again to 4.10%: The ASX Stocks to Buy, Hold, and Sell Right Now

RBA Hike: What It Means for ASX Stocks

The Reserve Bank of Australia has raised the official cash rate by 25 basis points to 4.10%, its second consecutive hike in as many months. The decision was made by a single vote, with five board members voting to increase the rate and four voting to leave it unchanged at 3.85%. A close vote does not mean a soft message, though. The RBA is telling investors clearly that inflation is not under control and further tightening remains on the table. The only real question is where your money should be sitting right now.

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Why the RBA Moved Again and Why May Is Already Live

Two things forced the RBA’s hand. First, underlying inflation rose to 3.4% in the year to January, well above the RBA’s target band of 2 to 3%, while the unemployment rate held steady at 4.1%. That combination tells the board that the economy is still running too hot. Second, the Middle East conflict has sent oil prices surging, adding fresh pressure to petrol costs and household budgets across the country. Oil prices have risen over US$30 a barrel, or around 43%, creating an additional risk that inflation expectations could become unanchored.

Following yesterday’s hike, all four major banks are expecting another 25-basis-point increase in May, which would bring the cash rate back to 4.35%, the level it sat at until February 2025. A May hike would effectively wipe out the three rate cuts delivered in 2025. This is not a one-off event. It is the beginning of a new rate environment, and investors who ignore it are taking on unnecessary risk.

ASX Stocks to BUY: Westpac Stands Out Among the Banks

When interest rates rise, banks earn more money. They lift the rates charged on loans faster than they raise the rates paid on deposits. That gap, called the net interest margin, goes straight to their bottom line. According to Macquarie’s research, the shift in rate expectations is expected to add 2 to 4 basis points to bank margins across the Big Four, with CBA and Westpac benefiting more because they hold a larger share of low-cost transaction deposits.

We believe Westpac (ASX: WBC) offers the best risk-reward of the Big Four right now. Trading at around 20 times earnings, it is cheaper than CBA while offering the same rate of leverage. Its Q1 2026 profit rose 5%, costs are under control, and APRA lifted its capital penalty overlay last October. For investors wanting bank exposure without paying a premium, Westpac is the clearest pick in this environment. That said, investors should monitor mortgage stress indicators in Westpac’s upcoming H1 results, as rising repayments can increase bad debt provisions and partially offset margin gains.

ASX Stocks to HOLD: Quality Dividend Names, But Don’t Add More

High-yield dividend stocks face a real challenge when rates rise. Term deposits start paying more, which makes share-based income look less attractive by comparison. That does not mean sell everything. It means being selective and avoiding adding to positions at current prices. Challenger (ASX: CGF) is worth watching in this environment. Its focus on lifetime annuities, which provide retirees with guaranteed regular income from a lump sum, could become increasingly appealing as rates stay higher for longer. Quality names with steady earnings and pricing power are worth holding. Just watch ex-dividend dates closely, as share prices can soften once dividends are paid.

ASX Stocks to SELL

Property trusts are the most rate-sensitive part of the ASX. Higher rates increase borrowing costs, compress asset valuations, and make bond alternatives more attractive by comparison. Scentre Group (ASX: SCG) faces a double problem: higher rates push down its property valuations while rising inflation squeezes the shoppers its tenants depend on. To its credit, SCG reported 99.8% occupancy in 2025 and has guided 4% distribution growth for 2026, providing a small defensive cushion. However, if the discount rate keeps rising, the valuation gap remains a significant risk that operational strength alone cannot fully offset. Office-focused REITs, including Dexus (ASX: DXS) and GPT (ASX: GPT), face further headwinds, as office assets carry more debt and are more exposed to weaker economic conditions.

The Investors’ Takeaway

Yesterday’s decision was expected. A May hike to 4.35% is now the overwhelming market expectation, though Governor Bullock made clear the board is not on a pre-set path and will wait for the Q1 CPI print due in late April before deciding. ANZ is calling for a May follow-up hike of 25 basis points, pushing the cash rate to 4.35%, where it expects rates to remain for an extended period before this tightening cycle ends. In our view, the investment playbook is straightforward: lean towards the banks, reduce REIT exposure, and hold only quality dividend names. The time to position for this environment is now, before May, not after the decision drops.