PHOTO: Most economists expect interest rates to rise at least 1 percentage point over the next year.(ABC News: Alistair Kroie/John Gunn)

It’s the key question for several million mortgage borrowers: When will the Reserve Bank start raising interest rates and how high will they go?

Unfortunately, there’s no clear answer. It was only months ago that the Reserve Bank was still hinting that rates probably wouldn’t rise until 2024.

That’s long since been blown out of the water, and now it’s considered a near certainty that rates will rise this year, the only doubt being exactly when.

This week’s RBA meeting has offered some further hints, and has caused a lot of experts to bring forward their forecasts for the first rate rise, with a growing consensus forming around June, although some still see August as a more likely lift-off date.

So, what should you be watching for as a sign the Reserve Bank is about to move, and how high will rates go when it does?

A woman with an umbrella open walks past the Reserve Bank of Australia's head office in Martin Place, Sydney.
Economists now generally expect the RBA board to start raising rates in June, or by August at the latest.(ABC News: John Gunn)

What changed this week?

Before the RBA meeting on Tuesday, the bank had repeatedly said in its public statements that it was “prepared to be patient” before lifting its official interest rates.

That phrase was conspicuously absent this week.

“Before the decision to abandon ‘patience’, Westpac had expected the initial rate hike in the cycle to come in August,” said long-time Westpac chief economist Bill Evans, whose rate calls are widely watched.

“That point would see the 2020 COVID emergency cuts unwound with the board likely to take a pause in September.

“Further hikes are now expected in October (25bps) and November (25bps) reaching 1.25 per cent by year’s end.”

Others such as Deutsche Bank, TD Securities and ANZ shifted their forecasts forward by between two and three months earlier this week and now also expect a June rate rise.

“A May rate hike should not be ruled out, however. A surge in core inflation in the first quarter CPI could leave the RBA thinking it has little choice but to move,” ANZ’s David Plank added.

A few other prominent forecasters, such as the Commonwealth Bank, AMP Capital and Capital Economics, had already been tipping rate rises to start in June.

In summary, many economists and most traders on the financial markets expect a rate rise in June, while those that don’t generally expect the first rate hike to happen by August.

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What are the rate rise triggers to watch?

The first one comes later this month, with the Consumer Price Index (CPI) for the first three months of the year from the Australian Bureau of Statistics.

This inflation figure, released on April 27, shows how much prices have been rising in the capital cities for the things households spend most of their money on, like rent, groceries, clothes, fuel, energy, transport etc.

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