Interest Rate Update (July 2023)

The following graph shows movements in both the 6 month and 3 year Bank Bill yield rates, for the period January 2018 to date.

These rates are wholesale rates which are net of any margin charged by financial institutions. It is not uncommon for retail premiums for 3 year fixed rates, to be 0.30% pa or 30 basis points above the wholesale premium.

Currently the 6 month wholesale Bill rate is 4.72% pa and the 3 year wholesale Bill rate is 4.58% pa, a discount of 0.14% pa or 14 basis points for the longer term.

The sharp increase in rates since the beginning of May 2023, has been caused by the persistently high inflation rate, despite the steep interest rate rises in the preceding twelve months. This has led to central banks increasing rates further, in an attempt to lower the inflation rate. Unemployment levels however are still quite low, largely resisting tightening monetary policy to date.

Given the current uncertainty and volatility in the global and domestic economy, it is particularly difficult to predict what rates may do in the medium to long term.