Australia's interest rates likely to stay elevated for years

Summarised from 2 outlets · Updated 19 Oct, 07:01 · Archive

Australia's central bank warns interest rates must remain higher than previously thought to control inflation.

Australia's Reserve Bank has warned that interest rates will remain higher than previously estimated for an extended period. Christopher Kent, the RBA's assistant governor for financial markets, told Commonwealth Bank's Global Markets Conference in Sydney that there was reasonable evidence that neutral rates were rising both in Australia and abroad. The shift reflects intense global competition for capital among artificial intelligence and data centre companies, which is pushing up the rate level needed to keep inflation sustainably low.

The current cash rate stands at 4.6 per cent, its highest level in 15 years. Markets have walked back expectations for another rate rise in November, but another increase by mid-2027 is still almost fully priced in. Critically, markets do not anticipate rates to fall below current levels until at least mid-2028, which would represent the longest period of a cash rate above 4.5 per cent since before the global financial crisis.

Kent's comments suggest that global economic growth has remained stronger than expected despite the effects of rising interest rates and geopolitical tensions in the Middle East. For mortgage holders, the implication is that interest rates will remain on a higher plane than previously thought if the RBA is to achieve its inflation targets.

How it is being reported

• Higher for longer: why low rates are relics of the pastThere's growing evidence that interest rates are becoming less effective at slowing demand, meaning central banks have to lift rates further to ease inflation.Perth Now · 19 Oct, 06:47
• Higher for longer: why low rates are relics of the pastThere's growing evidence that interest rates are becoming less effective at slowing demand, meaning central banks have to lift rates further to ease inflation.The West Australian · 19 Oct, 06:47

In this story: Reserve Bank of Australia · Christopher Kent · Commonwealth Bank · Australia

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