Citi: Interest rates will be 5.25% by end of year

Citi predicts that interest rates could increase up to 5.25 per cent by the end of 2010.

Citi is predicting that interest rates will be up to 5.25 per cent by the end of 2010, refusing to change its mind before a Reserve Bank (RBA) statement due on Friday (February 5th).

The RBA is due to make its quarterly announcement on monetary policy, which could intrigue Australian credit card holders and give a better view on the financial situation.

Joshua Williamson, a senior economist at the financial services company, told Reuters India: "We are not changing our forecasts until the statement is released. We think rates will be at 5.25 percent by year-end, with a pause in March."

But spending was up in the fourth quarter of 2009, according to government figures that found sales increased by 1.1 per cent.

Government data also discovered approvals for building new homes increased by 53 per cent in December, compared to the same period in 2009.

In addition, the Housing Industry Association recently predicted that there will be an increase in home starts in 2010.

By Joe Letts