More rate rises coming 2010

More interest rate rises are expected later in 2010, despite the governor of the Reserve Bank saying rates for most borrowers were back to normal levels. The RBA yesterday announced its sixth rate rise of 0.25 per cent since October. The official cash rate is now 4.5 per cent, with standard variable mortgage rates now over seven per cent from most major lenders.

RBA governor Glenn Stevens said “The board expects that, as a result of today's decision, rates for most borrowers will be around average levels. The board will continue to assess prospects for demand and inflation, and set monetary policy as needed to achieve an average inflation rate of 2-3 per cent over time.”

Financial market betting on another 25-basis point hike in June was at 19 per cent on Tuesday. Citi economist Paul Brennan said the market had increased the year-end cash rate target to 5 per cent. However, he expected the RBA to keep official rates on hold until August.

Source: Herald Sun