Rates likely on hold in August – Capspace

Interest rates are expected to stay unchanged in August, with the potential for one more rate hike, according to Tim Keith (pictured above), managing director of Capspace.

“The still tight labour market and strong employment numbers will keep pressure on the Reserve Bank of Australia (RBA) to maintain rates where they are,” Keith said.

Unemployment rate increase

ABS reported a slight rise in the seasonally adjusted unemployment rate to 4.1% in June, up from 4.0% in May.

The increase is attributed to employment rising by 50,000 people and the number of unemployed growing by 10,000.

Despite this rise, the labour market remains tight, with unemployment still 14.2% lower than pre-pandemic levels.

Strong employment pressures RBA

“The ongoing resilience in the labour force and the Australian economy will keep interest rates on hold for the foreseeable future, with more risk to the upside than the downside,” Keith said.

The employment-to-population ratio and participation rate remain near their 2023 highs, indicating a persistently tight labour market.

Floating rates benefit investors

With the potential for another rate rise, returns on cash deposits, term deposits, and floating-rate income investments could increase.

“For income-seeking investors willing to take on more risk, private credit investments can deliver yields close to 10% per annum,” Keith said.

This is nearly double the typical yields on cash and rental properties.

Resource: brokernews.com.au