If the pundits are right and the RBA doesn’t hike rates next month, this will be a major turning point for the economy.
(Image: AAP/Bianca De Marchi)
That’s it! If the interest rate futures markets are to be believed, our rate hike cycle is over.
A dramatic shift in interest rate futures pricing on Tuesday has led financial markets to bet rates will stop rising from here. As the next chart shows, on Monday rates were expected to rise through September of this year, with one or two more hikes priced in. But now markets suddenly expect only a tiny chance of a rate hike, and only until June. The far greater likelihood is no change.
The graph shows the forecasts of the interest rate futures market, which have recently proven to be reliable. It told us that rate hikes would come back in 2021, as the Reserve Bank insisted it would keep them “low for the long term”.
Read more about why a recession could be a good thing.
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