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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General

Despite the respective central banks delivering rate cuts over the last two weeks, Australia and New Zealand’s interest rates remain higher than the rest of the developed world at 1.50% and 2.0% respectively, including negative cash rates in Japan, the Eurozone, Sweden, Denmark and Switzerland. As a result, investors from all over the globe continue to seek out a positive return, which is pushing the Australian and New Zealand dollars higher and frustrating the central banks.

With low inflation forecast for some time and a stubbornly high currency, markets are starting to price in further RBA rate cuts, with some now calling a 1% cash rate in by mid next year.

Financial market pricing is currently leaning toward another rate cut, with a 40% probability of a rate cut priced in for November, rising to a 65% chance by mid next year (refer chart below).

Cash rate futures market

Implied cash rate from futures market

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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