Top economist shares interest rate prediction every Aussie with a mortgage should hear

A finance expert has predicted the Reserve Bank of Australia will hold rates during their May decision, but there could be more pain for homeowners on the way. 

AMP Capital's head of investment strategy and chief economist Shane Oliver said  the Reserve Bank will hold firm on Tuesday's cash rate decision.

While predicting the central bank would keep it at 4.35 per cent, Dr Oliver didn't rule out the possibility of a hike sometime down the line.

Economists have warned rates could be increased even further throughout the year as the economy continues to grow and keeps inflation above predicted levels.

Economists are predicting the RBA will hold the cash rate during Tuesday's rate decision but haven't ruled out the chance they could increase the rate (stock image)

Dr Oliver warned the RBA could take a 'tightening bias' which would keep Aussies from purchasing a house or other big buys.

According to Dr Oliver, a tightening bias hits the pockets of everyday Aussies, even without a mortgage or another large loan.

'Tightening bias does has an effect on you, as a homebuyer for example, you think "well maybe it's the right time to get in now because it's going come down",' he told news.com.au.

'But if you're hearing rates might go up again, then your urgency to go there and buy a new home is less.

'More generally with spending decisions people might think "OK I kind of went through this so far with my mortgage maybe I can spend a bit more because it looks like rates are coming down'".

'And then suddenly they're saying "it might go up" — it's going to change people's spending habits.'

He noted there is a chance the RBA could increase the rate, but that decision would be 'an over-reaction'.  

Aussie homeowners could be waiting longer than expected to see mortgage relief from the Reserve Bank as they try to get a hold of inflation (stock image)

The RBA opted to hold the cash rate at 4.35 per cent in March and will announce their next decision on May 7.

Headline inflation moderated to 3.6 per cent in the March quarter, down from 4.1 per cent in the December quarter, new Australian Bureau of Statistics data released last week revealed.

But the underlying measures of inflation were well above the Reserve Bank's 2 to 3 per cent target.

The weighted median, with volatile price items stripped out to focus on middle increases, produced an inflation reading of 4.4 per cent.

The trimmed mean, the RBA's preferred measure based on an average increase without big-moving items, grew by 4 per cent.

This was well above the Reserve Bank's February prediction of a 3.6 per cent level by June 2024.