In the 7 August Statement on Monetary Policy, the Reserve Bank of Australia indicated that, although the current policy rate of 3.0% remained appropriate for the financial climate at this time, their next rate move wis likely to be up. If the economy continues to improve, Australians should brace for paying higher rates for mortgages, loans, and credit cards.

The question remains when this uptick in interest rates is likely to happen. Financial experts are divided on this question, with some economic optimists foreseeing a rate hike within the current calendar year and others wondering how it could possibly happen before global financial conditions, and the Australian employment situation, have further improved.

Experts are also divided on the question of how sharp the RBA’s anticipated rate hikes are likely to be. Pricing in financial markets currently leans toward a small rise of 25 basis points in or prior to November 2009, but some economic analysts think that rate hikes, when they come, are likely to be larger, between 50 and 100 basis points.

However, several experts warn that banks need not wait for the RBA to make their move before hiking rates themselves. At times in the past, banks have raised their rates independently of the RBA’s official interest rate cycle, and some experts indicate this could occur over the next few months as banks struggle with their own margins and funding issues.

Source: news.com.au