By: Belinda Luc
The International Monetary Fund (IMF) has warned the RBA that it will need to lift the official cash rate to 5 per cent by the end of the year to keep monetary policy at neutral levels.
IMF yesterday released a report stating that while the current cash rate of 4.25 per cent is “closer to being neutral”, it will need to be raised to 5 per cent by 2011 to boost activity in the economy.
This prediction goes above and beyond Westpac’s forecast of 4.5 per cent by end of the year.
RBA governor Glenn Stevens said last week that interest rates have come “pretty close” to average normal levels, thereby coming close to target.
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