The Reserve Bank of Australia says it estimates the neutral nominal cash rate would be around 200 basis points above its current level.
The comments were contained in minutes of the RBA’s July 4 policy meeting.
The RBA’s estimate suggests the cash rate target will need to rise from 1.50 per cent currently to 3.5 per cent over an unspecified time.
The neutral rate would be consistent with the economy operating at full capacity with inflation stable.
Capital Economics’ chief economist Paul Dales said the discussion of “neutral” rates “could be interpreted as a sign that the bank is starting to think” about raising interest rates from the current record low of 1.5 per cent.
It's going to be an interesting journey for home owners and investors.