Fed Raises Rates

Sounds like the big four will be announcing some rate rises over the new year again. US 10 yr treasuries still around 2.36% though.

Fed Raises Rates, Eyes Three 2018 Hikes as Yellen Era Nears End
[The 7-2 vote for the rate move, the Fed’s third this year, raises the benchmark lending rate by a quarter percentage point to a target range of 1.25 percent to 1.5 percent. In another move that could tighten monetary conditions, the Fed confirmed that it would step up the monthly pace of shrinking its balance sheet, as scheduled, to $20 billion beginning in January from $10 billion.]

 

Yes
US economy on the rise How it impacts Australia not quite sure?

 

I had a look but couldn't find the info, anyone have a graph or correlation of US and Australian interest rates post GFC?

 

Yeah we were lucky that China did that big stimulus during the GFC that started a mining boom that peaked around 2012-2013 and sustained our economy during the first few years post GFC so RBA didnt have to cut rates as fast as other developed nations.

Now it looks like RBA may have no choice but to start raising next year if US manages a triple rate rise as projected. Though I don't think that is possible with China slowing down quite a bit, especially over next few months as their new year approaches and industry there winds down. in addition to their clampdown on polluting factories and provincial governments that defrauded their central gov.

Interesting year ahead for the RBA.

 

Why do you say that?

 

I believe rates will stay the same if not go lower next year! But if the RBA do decide to go up they wont stay up for long as it will hurt the rest of the economy...

 

Well just an expression, RBA always have a choice of what to do with rates.

However if it does not raise rates and lets the US rates overtake ours, the AUD will take a big hammering accompanied by fund outflows and massive reversal of carry trade. That will suddenly cause a recession which RBA will not be able to help by then reducing rates, as in such a scenario, reducing rates would then cause the AUD to fall further and more outflow of funds which will be VERY VERY bad for the local financial system.

So if the US rates do rise 3 times next year to >2% we will have to maintain or do a bit of rate rising.

 

You have to understand US interest rates at one point were at or very close to 0% while ours was much higher.

Also they have already had a pretty big rise over investment and IO loans any way thanks to APRA.

In my personal view, we will see rate cuts in Australia next year.

 

What did the aud do overnight after the fed raised rates?

 

I have always thought a drop in the AUD would help our economy.

 

I think at we are going to see Property markets in 2018 flat line at best. Just a prediction and I could be completely off the mark. Tassie may still roar ahead??

 

Most suburbs are down in terms of sales volume since middle of 2017 in Tassie. I can not see high prices continuing for much longer.

 

If the US raises rates it affects the cost of funding Australian mortgages. The banks are likely to follow US rate rises.

 

Thanks, I did some homework, the best yield I could get was 6.5% gross, just did not cut it for me. Still concerned how long this would last as a small economy??? Who knows..... I hope investors make a killing

 

At the moment overseas tourists seem to be keeping things afloat but tourism is a fickle industry.

 

didnt Morgan Stanley just speculated that rba will leave the rates as it is.

From MS :
"We see the RBA firmly on hold in 2018 as the headwinds from a consumer crunch and evolution of a housing slowdown prevent Australia from joining the global tightening bias to monetary policy.

The lack of carry for the Australian dollar makes rates differentials and rate expectations much more important in driving near term direction of the Australian dollar, particularly as the optics and direction of the commodity pulse stays muted over the quieter Northern hemisphere winter months.

Selling AUD is a top recommended trade in our global 2018 outlook across asset classes .

High real returns in EM and rising US rates mean that the yield advantage offered by the AUD relative to G10 counterparts may no longer be sufficient to compensate investors

When we look to the ASX 200 – we also note that the prospective dividend yield for the market is now trending below the long run average, standing at 4.4 per cent.

We explain this as a reality that after years of giving back cash to shareholders at the expense of growth, companies now realise that some increase in capital allocation to replacement and growth opportunities is required to achieve strategic goals.

Add this to a market earnings cycle for industrials that has decelerated as domestic headwinds mount,and lower earnings and reducing payout ratios are a logical outcome of the current state of play.

The combination of less carry in the AUD and domestic headwinds for consumer and housing linked Industrials are key drivers of our continued preference for outsized positioning in global growers.

 

Look at this article.... our economy in slow lane and Au$ expected to hit 68

Aussie dollar will fall to US68c, with economy stuck in slow lane: Westpac

 

****.. thats a 11 cent drop

 

Another mob called it hits 90c next year