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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

There was no Oscars-like confusion in financial markets last week, even following Donald Trump’s much anticipated State of the Union speech to Congress which surprisingly had a more structured delivery, was upbeat, but once again lacked specific details (do I look surprised?).

Despite only slight yield moves higher last week, the probability of a US Federal Reserve bank 16th March rate hike rose to almost 90% according to the futures market, up from around 50% a week earlier. There are now more than 2.5 US rate hikes priced in for 2017. Positive economic data has played some part in this, but ultimately the market is just reflecting what has been a relatively clear message from US Federal reserve officials and a desire for the market to perceive the Fed meeting as “live” for a rate hike.

This is at loggerheads with the RBA which is universally expected to leave the official cash rate on hold after their monthly board meeting this Tuesday as well as for the foreseeable future, given recent positive data releases here (refer chart below).

RBA cash rate and market pricing

Interbank futures pricing of the cash rate

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Source: Rural Bank


Disclaimer: Whilst all care has been taken in compiling the information, the information should not be relied upon as substitute for professional advice where necessary. Rural Bank accepts no responsibility for the accuracy, completeness or timeliness of the information and disclaims all liability in relation to any loss or damage suffered by the use of or reliance upon any information contained herein or in any attachment or annexure hereto by any person. Rural Bank – A Division of Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL 237879