Interest rates - everyone is an expert

Its a bit like seeing your neighbours house on fire and everyone cheers when you run out with your garden hose to fight the fire.
Sadly the house is still going to burn down, but for a brief moment there was a glimmer of hope.
And in other news Maersk Shipping, the company that ships just under 20% of the worlds containers has seen its shares plunge after it said its operating profit for this year was going to be substantially downgraded.
For countries like Australia that rely on Iron Ore, Gas and coal exports, its not the sort of news you want to hear.
Coal is already in the spotlight , as the Chinese have just announced they have banned all Australian coking coal through the port of Dalian.
And as Australia found out in the late 80s , as we went into recession, the GDP numbers can suddenly change , but your debt hardly moves, especially when commodity prices take a hit.
Although these days we are more insulated with the additional gas revenue and an unfortunate series of incidents in Brazil.

 

Aussie dollar fell half a cent at 12:15PM today when Bills call came out.

Here he is folks: Rates: 1 per cent by Melbourne Cup Day

 

^told you so

 

As Phillip Lowe said recently to a parliamentary enquiry, the bigger threat to the Australian economy is year upon year of poor income growth, which has caused a slowdown in discretionary retail spending and spreading to major purchases such as new cars.
To really kickstart the economy there needs to be large payrises for its workers.
Any catalyst for interest rates to be cut further will be because of rising unemployment levels, not because of falling house prices, according to Phillip Lowe.from the RBA.
So when Westpac are talking about possible rate cuts in the 2nd half of 2019 , I wondering if its more to do with rising unemployment that falling house prices
.
https://www.smh.com.au/politics/fed...ralians-to-get-a-payrise-20190222-p50zm0.html

"Taken at his word, the governor has today stated that the RBA would not ease policy unless they saw the unemployment rate lift in a sustained manner and inflation remaining low," he said.

"In other words, there would not be a pre‑emptive strike by the RBA to ward off rising unemployment. Rather, they would respond only if they were to see that the unemployment rate is rising."

 

I wouldn't listen that much to the RBA.

They try to show a straight face, to inject confidence in the economy, to show a steady hand, even though the reality might be different.

It's their job not to show fear, but to show confidence.

 

If you go back over the last couple of years , they have consistently got their projections all wrong ,and have only realised in the last few months that there is going to be no substantial wage growth for good inflation numbers, the Phillips Curve is long dead and not really working in the current market .Consumer spending in retail is very weak , in an era with the lowest interest rates in living memory for many Australians.
Unfortunately its the price you pay for with weak politicians to concerned with their core voting group and unable to make hard decisions.
It never occurred to many apparently "intelligent" people that if they spent years trying to drive down wages without looking at where the had to spend their income , eventually the market would freeze up, as more and more money was diverted from discretionary spending to essential payments like rent and mortgages.
Having current rates stuck at 1.5%,(the lowest in living memory for most Australians), and still talk of rates being forced down further due to people feeling not quite as wealthy as they thought they were , points to a far bigger underlying issue. .

 

The same people that have pursued an agenda of "trickle down economics" despite all empirical evidence of practical failure.

The same people that have been bestowed with the title of "superior economic managers" that have no understanding of demand in the economy.

 

The "I Told You So" moment. I am an "expert"!!!

People on this thread didn't trust the Market Curve. They prefer to listen to their commentators with no skin in the game.

The fact is, the RBA listens to the Curve!

You heard it here first! 25th Jan 2019

 

^Just an Update on the Curve that the RBA listens to:
https://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf

50bps more to come in addition to today's 25bps cut!!!

 

Actually what does implied yield curve mean?

 

The extra 25bps seem likely but not so sure about the extra 25 bps on top of that due to it being so far out. Markets are good at predicting (or driving?) rate moves in the next 6 or so months, much less reliable beyond that. After all, 12 months ago this same chart was predicting a rate increase about now.

 

This

What happened to the rate increase this chart was forecasting for 2 years?

 

Think of it like a stock, but forward looking. It's the way the open market has 'priced' expectations of the future cash rate set by the RBA.

 

Thanks, so are these actual fixed income products such as Bonds or its just an estimation of the RBA cash rate? I've always struggled to fully understand how to interpret these implied yield curve in a more technical way.

 

I'm a mortgage broker so I do have some limited grounds to call myself an expert. My 'expert' opinion on rates is as follows:

Over the past 15 years, I'm yet to see anyone accurately and consistently predict rate movements beyond 3 months.

As this is one of the few statements made about rates that I believe to be true over that time frame, it's clear that I'm about the only credible 'expert' there is.

 

What rate increase? Those forecasts were half-baked, not fully-priced in, very tentative and was therefore not something I bothered to follow.

 

These are actual financial products traded in the ASX with actual market players with skin in the game. They are called "futures" which are derivative financial instruments.

https://www.asx.com.au/documents/products/30-day-interbank-cash-rate-factsheet.pdf