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When Are Interest Rates RISING?



What actually is the cash rate? It is the interest rate on unsecured overnight loans between banks.

= RBA Currently maintaining cash rate at 10 basis points or 0.10% (Source: rba.gov.au)


· Current inflation in underlying terms has increased; still low at 2.6%

· Headline CPI inflation rate is 3.5% being affected by;
   – Higher petrol prices,
   – Higher prices for newly constructed homes
   – Disruption in global supply chains

· Inflation needs to reach 2-3% target range before the cash rate will increase

· Central forecast: 3.25% by end of 2022, stabilise at 2.75% in 2023


· Job Advertisements are at an historically high level

· Firms report it difficult to hire workers

· Modest Wage growth has increased; however still at the low rates prevailing before the pandemic

· Unemployment rates decline to historically low level of 4.2% in December 2021

· Central forecast: Unemployment 3.75% by end of 2023


· Prices have risen strongly

· Housing credit has increased by 6.7%

· Value of housing loan commitments has declined from high levels

· Important for borrowers to have adequate buffers and stress testing
   (Source – RBA: Governor Philip Lowe)


* AUD exchange rate has depreciated:

-0.7198 USD,

-Chinese renminbi 4.5476,

-Japanese Yen 82.53,

-European Euro 0.6398,

-NZ Dollar 1.0692,

-UK Pound Stirling 0.5328
  (Source RBA: Latest Exchange Rates 24.02.22)


· The RBA is prepared to be patient to hit the above measures.

· As supply-side problems are resolved and consumption patterns normalise – inflation will level out at 2.75%

· Uncertainty how consumption patterns will evolve

· Our prediction: Interest rates WILL increase by last quarter of 2023.

· What will it increase by? 0.25%… To total 0.35%. (Source RBA – interest rate decisions 2010-2019 average increase)

Assuming this increase gets passed onto the consumer – on an average $500,000 home loan is $1,250 for the year. $104.66/month. As always we encourage financial planning clients to have sufficient savings and funds for an emergency/cash buffer. Our recommendation: Tighten your budget now in preparation for this increase.

If you would like personal advice please speak to the number 1 Financial Advisers in Brisbane.
HH Wealth – www.hhwealth.com.au to book a free consultation.

General Advice Warning

The information in this article and the topics and strategies discussed are of a general nature. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.

If you are seeking financial planning services like ethical investing, retirement planning, to wealth management in Brisbane, book your consultation with us and see how we can help grow your wealth in more ways than one.

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CB Wealth Australian Pty Ltd T/As HH Wealth is a Corporate Authorised Representative (No. 1283595) of Axies Pty Ltd ABN 38 136 704 446 AFSL No 339 384. Chris Holme is an Authorised Representative (No. 1004793) of Axies Pty Ltd ABN 38 136 704 446 AFSL No 339384.

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