Economists divided over future interest rate cuts

The Australian dollar rose, albeit briefly, to a four-month high off the back of this week’s RBA announcement of no change to interest rates. 

The dollar rose to just over 93 US cents at one point but faded to just under 93 not long after the market digested the widely predicted announcement. 

RBA governor Glenn Stevens again made comments about the unusually high dollar. 

“The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months,” he said.

Economists are relatively divided on their predictions of interest rates in the future, with some expecting a rate rise later this year and others believing it won’t be until 2015. There are even some economists who believe there will be one more rate cut before they start to rise again. 

Surging home prices however, suggest we may see a rate rise sooner rather than later. 

Mr Stevens hinted at this in his latest statement. 

“Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments,” he said. 

“Credit growth is slowly picking up. Dwelling prices have increased significantly over the past year.”


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