Interest rates predicted to rise at next three meetings

Monday October 19, 2009

Predictions are high that the Reserve Bank will continue to raise the official interest rate at its next three meetings after the BBSW percentage reached its highest level in eight months with Glenn Stevens, the governor of the Reserve Bank of Australia stating that the Australian economy was indeed returning to its normal growth rates.

The BBSW, known as the 90-day bank bill swap rate, has reported a rise to 3.9 per cent from the previous 3.4 per cent over the last two weeks. This is an increase of 20 per cent over two weeks, a substantial move for this indicator.

The BBSW is used as an indicator of any future trends in cash rates and keeps count of the general cost of short-term borrowing, with the indicator being prompted into action after the Reserve Bank recently increased its official interest rate for the first in months, the first to do that worldwide. This same indicator is unchanged across all other economies or though it is predicted that New Zealand will be the next economy to follow suit and raise their own central interest rates.

Predictions of these interest raises has been supported by Access Economics, a economic consulting firm, which has suggested that the official rate will reach around 5 per cent as the national economy continues to recover from the damage of the Global Financial Crisis.

Australian banks have already begun increasingly their own interest rates, but are remaining in line with the official rate of 3.25 per cent, with all of the Big Four banks increasing theirs by the same 0.25 per cent increase.

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