Are interest rates going to go up or down in the next few years? What do you think?
It really will be a wait and see approach. If the RBA increases the interest rate they have to wait to see if the increase has the effect of slowing demand in the economy. this is known as a lag effect in economic terms.
"Should demand not slow as expected or should expectations of high ongoing inflation begin to affect wage and price setting, that outlook would need to be reviewed." RBA Media Statement MAy 2008
http://www.rba.gov.au/MediaReleases/2008/mr_08_07.htmlWhat they are saying is that if inflation pushes up prices of goods and services then wage earners demand wage increases . If wages increase then inflation increases which means interest rates increase.
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