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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

All of us at some time have walked past a Persian rug store that is closing down with dozens of large posters telling us to “act now” and take advantage of the sales. In some ways this is reminiscent of the warnings we’ve had for some time now about higher interest rates. If we hear it enough times, we will act. However, hearing it too many times can also mean we become immune or complacent (like the closing down sale or John Farnham’s final concert).

Since the start of December, long term interest rates have had a slow move higher and today sit 30 basis points above the levels just over a month ago (refer chart below). Sentiment both here and offshore has clearly moved bearish with the consensus view now clearly for monetary policy tightening causing longer term yields to rise and the yield curve to steepen.

People looking / waiting to fix their borrowings are experiencing death by a thousand cuts, seeing fixed rates drift higher each day with some rates now approaching levels not seen for three years (chart).

Cash Rate Pricing Chart

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Source: Rural Bank

 

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