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Experts Unanimous on Cash Rate Rise

cash rateA survey which used the services of 18 leading economists (including banks and organisations) yielded one common sentiment- the cash rate will be where it is for some time to come but it will definitely rise in a year’s time. Michael Yardney delves on the topic in an article for the Property Update.

Experts feel cash rate may rise in a year

A rise in cash rate could have some serious implications on the Australian citizenry. It is clear that our home loan sizes have grown to unprecedented levels and even if the cash rate rises to 5%, taking the interest rate to 7%, we will have borrowers tearing their hair apart. After all, it may mean paying something like $345 more on a loan size of $318,000 per month.

Experts expect upward movement in interest rates sometime between Dec 2014 and late 2015.

You can read the original article here.

Inflation may answer the ‘cash rate’ question

I think the fact that inflation has remained within control has given the RBA leverage to keep the cash rate low. Wage growth is not substantial and the labour market is not showing any signs of peaking. This will together keep the inflation in check.

Capacity constraint may force an inflation upturn (sooner or later)

For how long is the question? Failure to deliver in the resources sector will bring up capacity constraints and this will set up the chain reaction- rebounding inflation setting the cat amongst the ‘cash rate’ pigeons.

How do you connect inflation and cash rate?