Rising rates could 'bite' into Australia's $4.5 trillion superannuation sector, warns Bank of America
Bank of America analysts warn that current interest rates may not be restrictive enough to curb inflation, potentially threatening Australia's massive superannuation sector. The report suggests that further rate hikes are likely as global central banks struggle to balance economic growth with financial stability.
Why it matters
This highlights the potential for systemic financial risk in pension funds if central banks are forced to raise rates higher than currently anticipated to combat persistent inflation.
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The Bank of America, which is worth roughly $US275 billion ($395 billion), and dependent to a degree on functioning financial markets, is asking itself that question.
Low productivity, excess demand, the boom in artificial intelligence and the Iran war are all pushing up the cost of borrowing.
Despite this, interest rate increases have not yet done too much damage to share markets, property prices, or indeed many advanced economies.
But the Bank of America's head of interest rates strategy Mark Cabana has estimated the cost of borrowing, or level of interest rates, that would cause financial damage.
The Federal Reserve is the US equivalent of Australia's Reserve Bank.
Bank of America's Mark Cabana says interest rates are "not restrictive" enough. ( Supplied )
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