As interest rates continue to climb, economists are putting their bets on just how high they will go, with many believing the official cash rate will peak somewhere around the four to five percent mark by 2010.
Westpac’s chief economist Bill Evans has claimed that the interest rates will only hit 4.5 percent in 2010, and that the RBA is likely to leave rates on hold for the majority of 2010, given the fact that the economy is still recovering and the central bank has already raised interest rates three times in as many months.
A poll conducted last week of 21 economists found that 13 expected interest rates to reach anywhere between 5 and 5.5 percent by the end of 2010, while another six expected rates to reach 4.75 percent. Only three, including Westpac, expected rates to peak at 4.5 percent or below.
Reserve Bank governor Glenn Stevens spoke out last night about interest rates at an economists dinner, claiming that the “neutral” position for official rates “might be lower” because major lenders were now charging a bigger margin on mortgage interest rates, on top of the official cash rate.
Some experts believe this means the Reserve Bank may only raise the official interest rate to 4.5 percent.