Rates Have Hit the Bottom

Since the Reserve Bank left the rates on hold yesterday at three per cent, experts have started to suggest that the next movement we see will be an increase.

While many saw yesterday’s RBA decisionas disappointing, it was actually fitting, said LEDA Real Estate’s CEO, Barry Goldman.

“With key areas of the economy tracking well, and the previous rate cut already having had the desired impact in the market, this is the right decision,” Mr Goldman said of the stand still.

In fact, he said, we’re far from any urgency for another cut and “could actually be at the bottom of the interest rate cycle and consumers may need to brace themselves for rates to start increasing again.”

He explained that he doesn’t expect this to happen until the last quarter of 2013 at the earliest.

AMP Capitals’ chief economist and Rate Watch columnist for Smart Property Investment, Shane Oliver, previously pointed to early next year as the expected time for the start of any potential increases, providing time for potential improvements.

Loan Market’s Paul Smith agreed that keeping the rate on hold was expected across the board as conditions appear to be improving.

“The RBA has indicated that the inflationary pressures that prompted many of the rate cuts in 2012 have eased. The RBA believes that a three per cent cash rate is currently the correct level to grow the economy at it’s targeted pace,” Mr Smith said.

Reported by Jennifer Duke – www.spionline.com.au – april 2013