Next week will be another big one for borrowers. That's because the Reserve Bank of Australia (RBA) will be meeting on Tuesday to discuss interest rates.
With interest rates hurtling higher over the last 12 months to combat inflation, budgets across the country have been getting squeezed.
In light of this, mortgage holders will no doubt be hoping that the rate hikes are now over and done with.
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What's going to happen with interest rates next week?
Westpac Banking Corp (ASX: WBC) has been looking at economic data and has given its verdict on what it believes the RBA will do next week.
Well, the good news is that the bank's economics team believes the central bank will be keeping its powder dry.
The even better news is that Westpac doesn't just believe that the RBA will hold rates steady at this meeting, it expects rates to remain on hold at 4.1% until this time next year. At which point, the bank is predicting the first in a series of rate cuts.
Chief economist, Bill Evans, explains:
2023 has been a difficult year for gauging monthly movements in the cash rate. The Board has varied the weights it gives to the two key themes: risk of not achieving the inflation target on time; and needing to pause to assess the cumulative impact of this very rapid tightening cycle. There has been no clear lead indicator as to how these weights have evolved.
With inflation slowing more rapidly than the Board, and other central banks had expected; evidence of an easing in wage pressures; household spending struggling; and further effective mortgage increases embedded in the system, the policy of moving to the sidelines is now clearly the favoured approach. We think this should remain the case until the September quarter next year when inflation; growth; and unemployment have established a very clear message that will allow the Board to begin the process of unwinding the rate hikes.
