HOW MANY MORE INTEREST RATE RISES ARE AHEAD?

Borrowers could be set for a reprieve from more interest rate pain ahead of Easter with the Governor of the Reserve Bank of Australia (RBA), Dr Philip Lowe, indicating the central bank could take a pause from its relentless increases to the official cash rate.

After announcing the 10th successive rise in rates this month with the cash rate lifted to 3.6 per cent, Dr Lowe provided mortgage holders and other borrowers struggling to repay loans with some hope by suggesting a pause could be on the cards if upcoming economic data is positive.

“Before our next board meeting (on April 4), we’ll have important data on unemployment, we’ll have another monthly inflation indicator, we’ll have more detail on retail spending and the business survey,” Dr Lowe said.

“If, collectively, they suggest that the right thing is a pause, then we’ll do that, but if they suggest that we need to keep going then we’ll do that.” A pause would not necessarily mean the end of increases. ANZ, NAB and Westpac are all predicting one further rate hike before it reaches its peak. Capital Economics maintained its forecast of a 4.1 per cent after this month’s hike was announced.

The RBA has been hellbent on using interest rate hikes as a primary mechanism to pull back inflation, which hit 7.8 per cent in the year to December, with its target range of 2-3 per cent.

Yellow Brick Road Executive Chairman, Mark Bouris, is among a growing number of commentators questioning the RBA’s commitment to get inflation back under three per cent.

“This is a crazy number, let’s change that to four per cent. (Lowe’s) words were resolute to getting it back to two to three per cent and we’re at seven per cent, so it’s hard to think we’ll get it there that quickly.”

While the RBA still has a long way to go to achieve its desired inflation target, it needs to be cautious and allow time for all the increases to flush through the system.

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