Could this be the rates peak?

Home loan borrowers take heart. This week could be, just maybe, the week that interest rates peaked and the rate cycle turned. If not, it can’t be far off. The sizeable 9 per cent drop in consumer confidence this month takes this index to its lowest level since the early-90s recession. This is more telling than the latest bumper jobs result that takes unemployment down to 4 per cent.

The long run of sharemarket falls, the latest round of both RBA and market-inspired interest rate increases, and the further worsening in the US and world economic outlook – all feeding this sagging consumer confidence – may be enough to halt the excesses in the current economic environment.

We’ll have to wait to see the first-quarter inflation result at the end of April and evidence in other economic indicators that the economy really is slowing before we could have any confidence the RBA is reaching the point of deciding enough is enough. But we can say the chances of further interest rate rises have lessened in the past seven days.

Of course, the ever-strong jobs market is being carefully watched by the RBA in its fight to forestall the current inflation outbreak. Yet another big addition of new jobs in February, almost 50,000 full-time positions, has mixed implications for the interest rate outlook.

On the one hand, jobs growth is only a lagging indicator; a product of the general solid growth picture of the economy. When the economy cools, as it now looks as though it might be doing, job creation can be expected eventually to ease along with it. But the buoyant job market is itself a major factor in keeping spending up and the threat of a wages surge as employers compete for increasingly scarce skilled workers hangs over the economy in the meantime. This remains Concern No 1 at the RBA.