The National Australia Bank (NAB) is predicting the RBA will take a more aggressive approach to interest rates over the coming months.
According to NAB, the speech given by RBA Governer Stevens last week emphasised that by cutting the cash rate to three percent, the board were responding to downside risks to the economy that have not materialise, and as such, the very low interest rate settings were designed for a weaker economy than we are facing.
NAB group chief economist Alan Oster, said this confirmed their assumptions that “the current policy setting is excessively expansionary and that the cash rate increase at the October meeting was the beginning of a process to move policy back to more ‘neutral’ levels.”
The NAB predicts that, the RBA will increase interest rates by a further 25 basis points in November, December, February and March, taking interest rates to 4.25 percent in early 2010, with further increases predicted for 2011, taking the cash rate to 5.5 percent by the end of 2011.
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