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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

The past two months have been a remarkably stable period for financial markets, but the last week has seen that tranquillity disrupted, with volatility spiking and risk appetite reduced. Granted, moves haven’t been huge, at least not on the scale of the post-GFC era but it is only natural when this type of volatility occurs to ask “what has changed?” The answer in many ways is not a great deal.

Global economic growth is generally still fragile, inflation is still low (now below the RBA’s target range), and the debate over when US interest rates will rise continues to swing both ways. One thing that appears to be getting more airtime lately is a view that central banks are close to exhausting their limits and the effects of monetary policy easing. But even then, that shouldn’t really be a surprise.

This week’s US Federal Reserve meeting (on Wednesday) will be the main focus for markets, and is set to be interesting given the recent divergent views expressed in media speeches by various board members. The market currently has the probability of a US rate hike this week at 20%, with the market now looking to November of December for a move.

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Source: Rural Bank

 

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