FYI interest rate predicition

From: Michael Croft

Some good news for those borrowed to the hilt! Michael Croft

No push to lift interest rates soon
Daily Telegraph

MORTGAGEES rejoice: the Reserve Bank is unlikely to lift interest rates after its board meeting tomorrow.

In even better news, monetary policy is expected to be on hold for some time.

The RBA last cut rates on December 5, 2001 and that was widely tipped as the end of the easing cycle.

And economists said there is no rush for the next tightening cycle to start.

"We would be looking for steady policy over the near term," said St George Bank senior economist Tim Crawford.

"Recent economic data both here and in the US has come in better than expected. (Still) we see a fairly mixed picture but with a slight upward bias."

Mr Crawford said that the RBA is likely to leave rates on hold for some time noting that the recent strengths in the economy including the positive investment intentions data released last Thursday and the recent strength in consumer spending would be offset by weaker exports and a slowing housing market.

The expectations that the RBA will remain on hold were supported by AMP senior economist Simon Doyle who said that with business investment looking to pick up as the housing sector begins to slow, future growth should remain firm.

"It is still too early to expect a tightening from the RBA," he said.

"Capex would clearly ease some of (the RBA's) concerns about the rest of the economy (in the future)."

The RBA said in its semi annual statement on monetary policy last month that while in the last few months of 2001 the main risks to the world economy were on the downside, "in recent months these risks appear to have lessened".

Looking forward, economists are expecting rates to remain on hold for some time with Mr Crawford not looking for tightening until at least the fourth quarter.

He said that inflation would need to be sharply higher to prompt an earlier start to the cycle.

"If (rate hikes) were going to happen earlier than (the December quarter) I think you will really need to see inflation type indicators surprising on the high side," he said.

"That would be the thing we would be looking for for any earlier move."

The RBA has said, however, that it believes inflation is at its peak now and that it will fall to around the middle of the RBA's 2-3 per cent target band over 2002.

Still, there are some economist who are looking for the tightening cycle to begin sooner, saying that the domestic economy remains strong and rates may need to rise to prevent the economy from overheating.

AMP's Mr Doyle said he is looking for a rate hike by the end of the third quarter of 2002 and that this should coincide with the beginnings of the US Federal Reserve tightening cycle.

"I would say late September quarter, maybe the September meeting or heading into the fourth quarter of the year," he said.
Last edited by a moderator:


Reply: 1
From: Terry Avery

Interest rates

Hi Michael,

Seems like the article is having a bet each way, some saying they will go up and others saying they won't move. Five years ago I listened when they said they wouldn't go down any more and I fixed my rate at 8.95%. Then watched as they went to 6%. So now I try not to listen to the experts as they often get it wrong or contradict each other.


Last edited by a moderator: