What is going to happen to interest rates?

Up until recently most forecasters thought interest rates were going to go up a few  more times this year.

With the effect of the floods this view was even more common in the media, but some thought the rises may start in the second half of the year.

Then last week the inflation figures came out and surprised many people being much lower than most economists suggested.

So what does this mean for interest rates and your property investments?Read on to find out what leading commentator Terry McCrann thinks.

In a recent article in the Australian leading economics  writer Terry McCrann put his views:

“Now there is zero prospect of a rate rise out of the Reserve Bank when it comes back from the summer break on Tuesday. Apart from the fact there is no economic justification for a rise, RBA governor Glenn Stevens is hardly likely to relish the title of Un-Australian of the Year.

Everybody got lucky with the low December quarter CPI numbers. They iced not just a February rate rise but at least a March one as well. After that though, the rate issue will go live.

Stevens and the RBA will not be waiting to see the imprint of any wages outbreak on actual inflation data. They would be seeking to pre-empt not just the inflation but the wages acceleration ahead of it. Especially, if all elements of a global uptick start to click into gear.

That said, the RBA knows only too well that conditions could still turn in exactly the opposite direction. That it remains possible, if not probable, that the next official rate move could turn out to be a cut.

One future sees hefty rate rises this year, thanks to the government’s failure; the other a global double dip. Neither is particularly palatable.”

Some interesting times ahead – watch this space!!


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au

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