Hi
Lets face it, interest rates are still on the low side of the economic cycle. Like you, I hate interest rate hikes but if you weight the alternatives of NOT putting up interest rates, the results are more dire over the long term.
For example, the RBA cannot dictate nominal interest rate movements” (bank induced rates movements) so it has to increase or decreace the “real interest rate” to fend off a variety of economic problems most of all, “inflation” and “stagflation” “import/export presures on currence etc..
Let’s say the RBA left interest rates unchanged and let inflation rise to unsustainable levels, this would then lead the banks to include a premium for their loans as the risk of inflation would squeeze the average wage earners pocket.
Inflation means goods and services cost more, this will have the same effect as a rate rise.
The only down side to interest rate hikes is the negative effect it has on the job market, however because our job figures were so low it was an acceptable trade-off.
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