Reserve Bank sets scene for mortgage rate rises
By raising the Official Cash Rate to 6 per cent today, the RB has effectively ushered in the next wave of mortgage rate increases.
Wednesday, April 19th 2000, 12:00AM
by Paul McBeth
By raising the Official Cash Rate to 6 per cent today (Wednesday), the Reserve Bank has effectively ushered in the next wave of mortgage rate increases.
The Bank, as widely predicted, raised the OCR 25 percentage points from 5.75 per cent. That's the fourth increase in a row - the next scheduled review comes in a month's time on May 17 and will coincide with the release of the RB's May Monetary Policy Statement.
Last month's OCR increase of 50 percentage points caused a subsequent jump in many of the banks' floating rates from 7.6 per cent to 8.1 per cent. A number of commentators expect those rates to continue on up to ten per cent by early/mid next year.
Deutsche Bank said that, even after the OCR rise, on most estimates interest rates remained on the easy side of neutral. It's picking a 50 point rise in May to 6.5 per cent, and the OCR to reach 7.5 per cent by March 2001.
Macquarie Bank researchers also tipped a rise in May, of 25 to 50 points, "assuming equity markets stabilise and the Fed (US central bank) remains on track for a May tightening".
Reserve Bank Governor Don Brash said this morning that, while world sharemarkets had been quite volatile, at this stage financial markets appeared to have taken the view that global growth and inflation prospects hadn't been materially adversely affected. He said that financial markets appeared still to expect further increases in official interest rates in most major economies over the next few months, "but naturally, we will continue to monitor these international markets closely".