A great chart from Commonwealth Bank chief economist Michael Blythe this morning looking at the cycles of RBA rate moves and particularly the period of no activity between easing and then raising rates.
Time to get ready for rate hikes, because Blythe says:
The interest-rate sensitive parts of the economy are responding. So monetary policy is working and arguably current policy settings are overcompensating for economic drags that are now much weaker. This mix explains why further rate cuts have been off the table for a while and why the desire is to target any further stimulus to the weaker sectors via a lower currency…
Add on some upside inflation risks and we see the process of monetary policy normalisation commencing late in 2014.