The Reserve Bank of Australia (RBA) is widely tipped to increase the cash rate by 25 basis points to 3.35% on Tuesday.
Some economists like Deutsche Bank and Goldman Sachs expect the cash rate to peak at 4.1%, but Shane Oliver of AMP Capital warns that this would risk a major recession. Oliver also warns that lenders may need to increase their mortgage interest rates independently of the RBA, given that $188 billion worth of cheap funding via the central bank’s term funding facility (TFF) is set to expire over the next year.
The TFF was in response to the pandemic and provided lenders with access to funding at an interest rate of just 0.1%.
