Why higher interest rates are the new normal

September 21, 2026 — 5:15am

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Trying to guess where interest rates might move from month to month is a favourite pastime for many people in the financial markets (not to mention finance journalists).

And lately, we’ve all had plenty to speculate about. The surging oil price is making our inflation problem worse, prompting markets last week to price in up to three more Reserve Bank interest rate rises, which would push the cash rate above 5 per cent.

As dramatic as that would be, however, this column isn’t about what the RBA might do to interest rates this month or at the meeting after that. Rather, it’s about where rates are likely to gravitate in years ahead, and I’m afraid the recent news on that front is not what borrowers want to hear.

Economists and market experts lately have predicted rising global interest rates in the long term, and that’s likely to mean we end up with higher rates in Australia.

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Clancy YeatesDeputy business editor

Deputy business editor

The causes are not only increasing inflation but also global “megatrends” as the rise of artificial intelligence, growing geopolitical conflict and decarbonisation.

What do these huge societal shifts mean for interest rates?

Quite a bit, according to the “neutral interest rate,” an economic concept that’s big in the world of central banking.

Raising interest rates is........

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