There will be more rate rises, though

There will be more interest rate rises.

The Reserve Bank Governor, Glenn Stevens, himself is making that clear.

In his statement yesterday, explaining his board’s decision to keep interest rates on hold this month, Mr Stevens dropped two big hints.

He said Australia’s inflation rate is likely to be  ” in the upper half of the target zone over the next year.”

The bank aims to keep the nation’s underlying inflation rate within a 2-3 per cent range over the course of a business cycle. It, typically, raises rates if it believes inflation is rising too fast.

Mr Stevens also said Australia’s ” high level of the terms of trade expected to add to incomes and demand, output growth over the year ahead.”

However he added that the bank’s present target rate of 4.5 per cent appears to be appropriate “for the near term.”

The leading economist, Don Stammer takes a similar view.

However Dr Stammer warned, recently that Australian families with big mortgages should prepare for further interest rate rises, from early next year.

Meanwhile the Federal Treasurer, Wayne Swan, is taking all available credit for the bank’s latest pause, which followed six rapid fire rate rises, from late last year.

He said rates,  now, are still 2.25 per cent lower than they were when the Howard government lost office.

Mr Swan also said “This news will be welcome relief for many Australian families and businesses around the country who are of course doing it tough.

“Today’s decision means a family with a $300,000 mortgage is still paying around $450 less a month than they were prior to the onset of the global financial crisis.

“That is around $5,400 less a year.”

The Rudd government would like to see interest rates stay on hold, until after the Federal election that is due later this year.

Mr Stevens made it very clear. in his explanatory statement,  that worries over high debt levels in Europe had influenced his board’s decision to keep rates on hold this month.

“Since the Board last met, concerns about sovereign creditworthiness in several European countries have been a focus of financial markets, he said, adding:”Investors have generally displayed a good deal more caution.”

“As a result, equity prices have fallen and long-term government bond rates have declined outside of the countries most affected by the sovereign concerns.

“The Australian dollar fell sharply as part of this adjustment,” Mt Stevens said.

” Commodity prices have also softened, though those important for Australia remain at very high levels,” he added..

The bank’s decision to keep rates on hold was widely welcomed.

The Housing Industry Association described it as “appropriate.”

And the Australian Industry Group called it “a wise move.”