Brian Berry - Financial Advisor
	Straight forward, quality financial advice - so you can get on with the fun stuff in life. Click to view Rothbury's website.

The focus this week will be on Thursday's review of the OCR (Official Cash Rate) by the Reserve Bank. For once the market and economists are unified in the opinion that there will be no change to the rate and the interest will be more as to whether the Reserve Bank provides any better guidance as to when they will start hiking the rate to control inflationary pressures.

Why is no change expected? Well, the Reserve Bank had indicated a start to the increasing cycle at around the middle of the year and an April 29 date appears to fall outside of that period. Added to that was last week's announcement of a lower than expected quarterly inflation figure. This suggested to some that household budgets and businesses are still under stress and there is therefore no immediate pressure for the Reserve Bank to start increasing interest rates.

Presuming that the OCR is not unexpectedly increased on April 29, then the debate centers on whether the rate will be increased on June 10 or July 29 and it's amazing how some economists' predictions have changed over the last week.

One of the main bank economists has been religiously promoting a June 10 start date up until now and has now moved to favour July 29 and another bank economist that favoured a July 29 start date (or later) has moved their position to favour a June 10 start date! Hence: 'The economists' flip-flop'.

Those that favour a July 29 start date do so because they believe the economic recovery is not fully bedded in and therefore starting the increasing cycle too early could put that recovery and households and businesses at risk.

Those that favour a June 10 start date, do so because they believe that date is consistent with the guidance and forecasts that the Reserve Bank has previously provided and that the 0.4 per cent quarterly inflation figure was, whilst lower than expected, still above the Reserve Bank's forecast rate of 0.3 per cent and therefore an increase on the OCR on June 10 is on the cards - remembering that starting too late can be just as damaging as starting too early.

What this really shows is that no-one knows what will happen!

As a borrower what should you do? Well, there are no guarantees here, but it still appears that taking the variable rate in the short term (next month) is a viable option but that you should, if you want certainty, be prepared to fix all or a substantial part of your loan exposure at reasonably short notice if the increasing cycle start date looks likely to be June 10.

On Thursday we may get some guidance from the Reserve Bank as to what the triggers will be for the increasing cycle to start or, on the other hand, they may not change their stance at all and the only guidance will be 'around the middle of the year'.