Consumer confidence 'may prompt interest rate rise'

A recent jump in public confidence may prompt the Reserve Bank of Australia to increase interest rates, it has been suggested.

The Westpac-Melbourne Institute Consumer Sentiment Index has revealed that shoppers are now feeling more positive about the economy.

Figures from the research show confidence is now at a two-year high as the index rose by 5.2 per cent during September.

Bill Evans, Westpac’s chief economist, explained this represents a sigh of relief on the part of many people that Australia avoided recession and job losses have not materialised.

"This is a truly extraordinary result," he said.

He went on to add that home loans customers outlook improved by 4.4 per cent.

Mr Evans, however, explained that this may improve the case for a rate hike next month, but said forecasts indicate a slowdown in the current economic momentum, which may mean an increase will be deferred.

Such a development may impact on those looking at term deposit interest rates.

This comes as the National Australia Bank predicted there would be two interest rate rises before Christmas.

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