Interest rates set to stay higher for longer, says economist Chris Richardson | The Business

An interest rate hike on Tuesday is all but locked in, with some economists expecting a follow up increase in November. Independent economist Chris Richardson says the economy needs to take its metaphorical medicine. "We have a system that uses interest rates to basically hit borrowers over the head. But it has other impacts too. It has impacts on things like the exchange rate and the like. But yeah, we get to pick our poison, but we can't avoid the fact that it is poison to bring inflation down, there has to be pain for someone," he said. Investment in artificial intelligence (AI) data centres, too much demand in the economy, and the Iran war continue to put upward pressure on inflation and interest rates. Chris Richardson said he does not see this ending anytime soon. "It's a return to the old normal, if you like ... it's been driven by economies stronger than expected, by governments borrowing a lot, by the big tech companies borrowing a lot as well. But that says to me it's not going away. Regardless of what the Reserve Bank does in the next year, markets are saying interest rates in Australia for homeowners, for everyone, aren't going to be going down for a while and not much when they do." He also sees property and share prices falling as interest rates stay elevated. "And I suspect it's the next reckoning for share markets as well," he said. Subscribe: http://ab.co/1svxLVE Note: In most cases, our captions are auto-generated. #ABCNEWS #ABCNEWSAustralia #ABCBusiness