In the last few months Australian interest rates have been rising. The Reserve Bank of Australia has again increased the cash rate by another 0.25% taking it to 3.75%. While we have no doubt the fact that Reserve Bank of Australia hasn’t increased rates three months in a row since the 1980s, we should als consider that 3.75% is still very low for the cash rate in the last 20 years. Our Australian interest rates are still in historical low at the moment
Bank mortgage rates also remain 20 years low. The average banks’s standard rate increases by 0.25%, this could take the rate to around 6.50%. From what we see in the recent months, the rate was lower than this was in a short period of them just after the 11th Sept Word Trade Center attacks.
Although Reserver Bank of Australia did not give out any hints about Interest Rate Rise for next month but in the recent economic recovery , we should predict that the rate will continue to increase to surpress inflation.
We should not forget that rate hikes are likely if the economy continues to recover as expected. The Australian economy is recovering expectionally well in the recent event. In terms of the over all economy performance, the Reserve Bank may have seen no point for interest rates to remain at historically low levels given the economic growth continues.
• More Interest Rate Hikes are likely in the year ahead as the Reserve Bank of Australia looks to move Interest rates towards normal levels. The normal level is now estimated to be around 5.00%.
• RBA will likely control the inflation level and tigthen its Interest Rate policy in 2010.
• Rising interest rates could have negative impact to low and medium income families. Most of the families will take a longer than expected recovery process.
• Interest Rate rise will push Australian dollar to new high against USD and other other currencies.
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