The official cash rate could hit 5.5 per cent by the end of 2011, the National Australia Bank’s (NAB) monthly business survey and economic outlook shows.
NAB has forecast yet another 50 basis point increase before the end of this year, which would mean potential rate rises in November and December.
Interest rates are anticipated to rise after the RBA Governor Glenn Stevens hinted at potential rate rises in the coming months.
Speaking at a financial breakfast in Perth yesterday, Mr Stevens said Australia’s weakest financial period had ‘probably past’.
“Barring another serious international setback, the economy is likely to continue on a path of gradual expansion during 2010″, he said.
“If we were prepared to cut rates rapidly, to a very low level, in response to a threat but then were too timid to lessen that stimulus in a timely way when the threat had passed, we would have a bias in our monetary policy framework. Experience here and elsewhere counsels against that approach.”
Loan Market Group Chief Operating Officer Dean Rushton said most economic forecasters expected official rates to rise up to two per cent over the next 18 months.
He said mortgage holders with variable rate home loans should examine their financial situation and speak to a mortgage broker to determine whether they can get a better interest rate.
Sources: Mortgage Business, Loan Market
