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  • Writer's pictureCOMPASS

Interest Rate Rises - When?

Updated: Nov 16, 2021

In a recent broker industry magazines, an article was published beginning with the following comment, and I quote, “ Economists and markets flatly disbelieve the Reserve Bank of Australia’s insistence that the cash rate won’t rise before 2024 Industry watchers believe that surging prices in housing and energy will push sustainable inflation back to its target range well before then, according to a report by The Australian Financial Review. “

To arrive at the above comment the AFR had surveyed 26 economists who felt that rates would begin to rise in mid 2023. However some are predicting as early as late 2022 with an interest rate increase of between say .15 to .40 of 1 percent. It all comes down to inflation pressures and whether inflation will accelerate back to within the Reserve Bank’s target range of 2-3%. Where inflation pressures will come from can be complicated to dissect but concentrate on a couple of the following key points:-

· The rebounding economic conditions moving out of Covid lockdown

· Pressure on wages as underemployment and unemployment eases due to the first point

· The government easing back on printing money, buying back treasury bonds

· Pressure from overseas , imported inflation from the likes of USA & UK

· Cost of fuel rising , again as world economies improve in output

Now commercial banks tend to move their interest rates prior to the Government announcements only because their daily cost of borrowings changes. In a recent past article I pointed out that longer term 4 and 5 year fixed home loan interest rates had risen, but now we are also seeing some upward pressure on 2 and 3 year fixed rates. This is evidence that interest rate rises are just around the corner. As a borrower you need to prepare for this.

Ring Michael on 65832211 to make an appointment to discuss your borrowing position.

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