Be prepared for an interest rate rise

Have you been seeing the reports in the media that discuss the potential for an interest rate rise?

It can be wise to prepare your budget so you are not surprised when the inevitable happens.

The Reserve Bank promises that it will not raise interest rates until;

  1. inflation is sustainably between 2 – 3 per cent,
  2. unemployment is closer to 4%; and
  3. wage growth approaches 3%.

The Reserve Bank believes that all three of the above conditions will not be met until 2023. However, many economists disagree.

It should be noted that;

  1. the inflation for the September 2021 quarter was 3.0%.
  2. the unemployment rate for November 2021 was 4.6%.

Furthermore, central banks such as the UK and New Zealand have already lifted their interest rates.

In Australia, we have bond yields pointing to higher rates ahead. The Australian 10-year bond yields rose from 0.98% to 1.67% in 2021.

Financial markets will be closely watching for signs of inflation and rising interest rates which will have an effect on companies profitability and the corresponding strength of their balance sheet. As the security of investment capital is critical, we will continue to only recommend investments with sustainable earnings and strong balance sheets.

Should you require further information please feel free to contact Peter Quinn by submitting an enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.

The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.  It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.