We spoke to 4 economists about when the interest rate rises will stop. Here's what they said.

Anyone else feeling a teeny tiny bit OVERWHELMED by questions around money right now? Please tell me it's not just me...

Cost of living is at the forefront of most of our minds, and was considered a big-ticket item for the government to work on in the recent federal budget. Although there were a few measures introduced to help mitigate the pressure, it's fair to say that the stress remains.

This week, we received word of yet another interest rate rise. Fun fact: this is the 12th rate rise in just over a year. Actually, reflecting for a moment, perhaps this fact isn't so fun. 

Two of the biggest questions on our lips are the following: 

Number one: Why are interest rates rising? 

And number two: When will interest rate rises stop? 

So, to provide some juicy money details, we spoke to the economic experts.

Watch: 5 money lessons your parents told you, that you should probably forget. Post continues below.

Here's what they had to say. 

Dr Zac Gross, a Lecturer in economics at Monash University. From 2011 to 2013, he worked as an economist for the Reserve Bank of Australia.

Dr Gross tells Mamamia that the reason we've seen so many interest rate rises in the past six months comes down to the Aussie Government spending too much money during the pandemic to support our national economy.

"It was the right thing to do from the point of view of keeping everybody safe. But this means we now have a very high rate of inflation. So, the reason we are increasing interest rates is to try and get the inflation rate back down," he says.

"An interest rate rise is the least worst option as opposed to letting inflation run rampant. There are cons to both scenarios, and there's no easy or pleasant answer, but this is what we need to do to keep things under control."

As for his answer to the big question: "There's probably another interest rate rise left in the Reserve Bank of Australia (RBA), or maybe two. But I would expect us to see another one in August and then they'll keep it on pause from probably the rest of the year. Then in 2024, I guess they would be start breaking down the interest rates."

When it comes to a handy tip, Dr Gross says one of the best things we, as individuals, can do is engage with our banks to try to get a better rate. 

"In economics you hear of the concept 'the loyalty tax'. If you stick with the same bank forever, or even for a few years, you're almost certainly not getting the best deal. This applies to other things like your mortgage, phone plan, health insurance and more. If you shop around, you'll have a far better chance of getting a better deal."

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Dr Ankita Mishra, a Senior Lecturer with the School of Economics, Finance and Marketing at RMIT University.

Dr Ankita Mishra says the reason we've seen so many interest rates lately comes down to the RBA aiming to maintain the inflation rate. 

"The RBA uses interest rates to reduce inflation. The reasoning behind this is that inflation is caused by a higher demand for goods and services, which is growing faster than the economy's ability to supply them," she says to Mamamia. 

"As a result, prices of these goods and services increase. By raising interest rates, people are encouraged to save more and spend less, which can help reduce prices and lower inflation."

When can we expect interest rates to stop rising? Dr Mishra says it comes down to when the RBA feels inflation is starting to chill.

"If the RBA sees that inflation is gradually decreasing and moving towards their target range, they may decide to stop raising rates. One factor the RBA may be considering is that changes in interest rates often take time to have an impact on the economy. For example, if they raise rates today, it may take a few months for the effects to be fully felt. This is called a lag."

With this in mind, it will likely take a few more months before we see any changes. 

"I understand that this is a challenging time, and I can relate to it. The best approach to deal with the situation is to reduce our spending on things that are not essential. By cutting back on non-essential purchases, we can help slow down the demand for goods and services in the economy. This, in turn, can help prevent future increases in interest rates."

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Professor Rolf Gerritsen, a political economist and professorial research fellow at Charles Darwin University.

Speaking to Mamamia, Professor Gerritsen agrees that interest rate rises ultimately come down to inflation.

"Inflation is far higher than the RBA guidelines of two to three per cent. At the moment, our inflation is running close to seven. Because we import everything, a lot of our inflation is imported. 

"Secondly, by just tacking wages and interest rates, that won't reduce inflation because of the nature of our economy. So if we're going to use only interest rates [to combat inflation] which suggests a completely open and competitive economy, then we're going to end up with probably another 100,000 unemployed," he says. 

When does Professor Gerritsen expect to see interest rate rises halt? Unfortunately, not for a while.

"I unfortunately expect more to come this year, or until the Reserve Bank Chairman's tenure in office is not renewed, because he seems very set on the classical sort of economic theory that the way to stop inflation is to just raise interest rates. But there are consequences to that.

"I hate to say it, but I would tell people to take a deep breath because it's going to get worse before it gets better."

Shane Garrett, Chief Economist, Master Builders Australia.

Shane Garrett tells Mamamia that part of the parcel with trying to curb inflation is that high interest rates have the potential to "kill off important things, like jobs and economic activity". 

We've seen this particularly in the construction industry. If the volume of new home building remains this low, the worry is that housing affordability will get even worse.

"We are witnessing the heaviest sequence of interest rate rises in over thirty years — and the extent of the increases is far greater than nearly everyone expected," Garrett notes.

"If financial markets are to be believed (and they shouldn't always be), then we are probably in for two more 0.25 percentage point increases over coming months, before interest rates stabilise for a while."

Ultimately, the RBA reckons that inflation probably won't be back to target until mid-2025.

For those who are feeling a bit deflated by this news, you're not alone. But as Garrett says to Mamamia, financial issues can be a big source of worry — so it's important to look after ourselves.

"Do remember that interest rates will start going down again at some stage. There is some chance this could be before Christmas but it's more likely to be in the first half of 2024. And by then, the phase of unrelenting price rises is also likely to be ending."

Let's all keep our fingers crossed for less interest rate rises in 2024...

Feature Image: Canva/Mamamia.