Borrowers can be forgiven for being confused about the direction of interest rates over the past five weeks. Property Observer has compiled the top 10 defining economist announcements since the RBA's July decision to keep interest rates on hold: 

1

July 5 Rates on hold for rest of 2011: ANZ

Following the RBA’s decision to leave rates on hold on July 5, ANZ forecast rates to be on hold for the rest of 2011 but also estimated a “more gradual tightening cycle, with the cash rate to reach 5.75% in the second half 2013".

2

July 5 A rate hike in November: Westpac

“We see the first possible window for a hike as the November meeting. That would require an improvement in consumer spending and more clarity on the situation in Europe,” Westpac forecast on July 5. 

3

July 12 A 25 basis point rise in December: NAB

On July 12, NAB said the next 25 basis point rise would be deferred until December, “when growth momentum is more apparent and labour market tightens significantly”. The bank put a second 25-basis-point rise back to May 2012.

4

July 15 Rates to fall in October: Westpac

On the back of “further adverse developments in Europe” Westpac changed its minds on rates, forecasting a 25 bps rate cut by October and 50% chance of a follow-on move by February next year.

5

July 21 Rates down by 1% by late 2012: Westpac

Following publication of its Red Book, Westpac said the RBA would move to an easing bias in the months ahead before delivering a series of rate cuts from December with a 1% reduction by late 2012.

6

July 27 Rise of 25 bps before the end of 2011: ANZ

Following the release of higher-than-expected quarterly CPI figures for June, ANZ said a 25bps interest rate rise before the end of the year was very likely.

7

July 27 No rate hike in August: Westpac

Following its bold declaration that rates would fall, Westpac had a go at the method the ABS used to compile its inflation data – “We note with relief that the ABS plans to change this troublesome sub-component from the CPI from the September quarter” – but became a lot more cautious about future rate cuts.

8

July 29 Rates up in fourth quarter to 5%, peaking at 5.75% by mid-2013: CBA 

“We do expect the RBA to lift the cash rate to 5% at the November board meeting after the release of the third-quarter CPI in late October, which is likely to confirm intensifying underlying inflation pressures. We then see the RBA gradually lifting the cash rate to a likely peak of 5.75% by early 2013," said Commonwealth Bank of Australia. 

9

August 2 Rates going down in November: Westpac

Following the RBA's August 2 decision to leave rates on hold, Westpac declared: “Given our view that the global economy is likely to remain a risky place and that inflation pressures will continue to ease in the Australian economy, we see no reason to change our forecast that the next move in rates will be down by late in 2011.”

10

August 8 Emergency rate cuts possible: ANZ

Following S&P’s US downgrade and global equity markets crashing, ANZ warned that a further sharp decline in equity markets would increase the risk of the RBA enacting “emergency rate cuts”. However, should international markets stabilise the bank says the RBA thinking would “reverse toward higher interest rates once more”.

Rismark economist Christopher Joye wrote on his macroeconomic blog that he remained of the view that interest rates werelikely to go up rather than down. However, he noted the possibility of the RBA doing a 180-degree spin if the crisis worsened, with interest rate markets pricing in potential for six rate cuts between now and March next year.

Click to enlarge

Source: Christopher Joye