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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, Commodities

Only this week, the market learned that consumer confidence dropped 5.7% in December – a fall that, at least notionally, shows consumers at their most anxious in more than three years with confidence back to where it was in the wake of the GFC. Meanwhile, business confidence has declined to its lowest point in over a year.

So, does this point to a need for lower interest rates? According to Westpac and now the NAB, the answer is yes. However, right on cue, the Reserve Bank Governor throws a spanner in the works and comes out with a comment last Friday that the best thing the RBA could do was to be “steady and predictable” (on rates).

I view the RBA Governor’s message of stability and predictability as consistent with a call of no change in rates until late next year, provided the economy continues to grind towards moderately faster growth.

Nonetheless, market pricing for further rate cuts has firmed up over the last week. The futures market is now fully pricing in a cut of 25 basis points by April, with a 40% chance of an additional cut later in 2015.

This will be the last “Weekly Economic Commentary” for the year; returning in early January.
And so I take this opportunity to wish readers all the very best for the holiday period and a very happy and safe Christmas and New Year.

Source: Rural Bank

 

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