From the overnight Australian Financial Review:
- “Turmoil in global markets has pushed out expectations for the first interest rate rise from the Federal Reserve
- Threatening to hold up the Australian dollar
- And frustrate the Reserve Bank of Australia’s hopes to start “normalising’’ its record low rates
The article has some interesting comments from economists/analysts (boldings mine):
CBA chief economist Michael Blythe:
- “US markets have gone from saying rates will probably go up in the second quarter of 2015, to saying they are unlikely to go up ever basically.
- Any chance of a near-term rate rise in markets has been taken out by this,
- There’s this widespread view that the RBA can’t move before the Fed, but the reality is they’ve done it many times. The issue’s what it might do to the currency
- Outside of the US most central banks are very keen to see the Fed start doing something more concrete because that is widely seen as a trigger for the US dollar.”
JPMorgan economist Tom Kennedy:
- (On the Fed potentially tightening) “Those risks are pretty symmetric. There’s a risk you can go too early and stall the recovery before it gets on a firm footing. At the moment the risk is probably a bit more skewed to them going too early than too late
- The main transmission for Australia will be through the currency. If they delay hiking that’s obviously bullish for the Australian dollar . . . as we know, the RBA does not want an elevated currency”
The article is here, but is gated: RBA rate outlook in turmoil
