Australia lead the world’s rising interest cycle post-crisis, on the back of a recovering world economy which it was well levered too thanks to its commodities relationship with China and low unemployment. Other nations soon followed with their own rising interest rates, as their economies rebounded, even though the U.S. has yet to take part.
Markets had even been pricing-in further rate hikes from Australia this year not too long ago. Unfortunately, that’s no longer the case as previously highlighted by Joe Weisenthal. In fact, the market is forecasting a potential interest rate cut.
This week watch Australia start proving these market expectations correct.
Economists do not expect the Reserve Bank board to raise interest rates at its meeting tomorrow afternoon, according to a survey by Bloomberg. The chance of an increase was -8 per cent, according to the Credit Suisse probability index.
The potentially aborted Australian rate hike cycle is shown below. Australia changed interest rate outlook seems to be confirming sudden trepidation coming out of the U.S. (where rates seem likely to remain where they are for longer), Europe (which faces a risk of double dipping), and even China (which has suddenly gotten cold feet when it comes to clamping down on liquidity and its property market.)
Something is amiss down under, and it has implications for us all.
(Chart via Trading Economics)
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