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Interest rate hikes on the horizon

by Staff Reporter7 minute read
The Adviser

Interest rates will remain on hold for the rest of 2014 but will begin steadily rising from 2015, according to a survey of 28 economists.

All the experts surveyed by comparison website finder.com.au forecast that there would be no change to the official cash rate at today’s monthly board meeting of the Reserve Bank of Australia.

However, all respondents forecast a rate rise next year, with many betting on a gradual, upward interest rate cycle for the next three years.

According to the survey, the cash rate is expected to start rising in June 2015.

There is a 46 per cent chance of an increase during the third quarter of 2015, a 21 per cent chance that rates will begin to rise in the first quarter next year, an 18 per cent chance of rates to start rising in the second quarter of 2015 and a seven per cent likelihood of rate hikes from October next year.

The cash rate is expected to gradually increase over the next two to three years and hit a ‘new normal’ level of four per cent, according to the survey.

Only 11 per cent of the 28 experts surveyed believe the cash rate will reach the historical average of about five per cent, while 64 per cent believe a ‘new normal’ of below five per cent will be reached.

[Related: No cash rate movement for another year, says RBA]

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