Interest rates to rise on Tuesday

IT IS likely that interest rates will rise following next week’s board meeting of the Reserve Bank of Australia, predicts leading home loan broker Club Financial Services.

Coffs Harbour director, Russ Holland, said that while there has been limited economic data released during February, a decision to increase rates at the Reserve’s board meeting next Tuesday was probable.

“We know the economy is expanding and the Reserve Bank is focused on keeping inflation within a band of two to three per cent this year,” Mr Holland said.

Reserve Bank Governor, Glenn Stevens, said that it was customary to experience pauses in interest rate hike as the economy expanded, but Mr Holland believed the February pause would further validate a March increase.

“It is important to remember that interest rates are still relatively low, credit remains tight for banks and lending conditions are still difficult for smaller businesses,” he said.

The Reserve Bank surprised analysts by deciding to leave rates on hold at its first meeting in February.

“What we do know is that borrowers are no worse off now than they were 18 months ago,” Mr Holland said. “However, one sector that may be feeling the pinch is recent first home buyers.

“Consumers should be incorporating two to three more interest rate rises into their budget.”



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