Is this the end of the ultra-low interest rates era?

There's a very good chance (like Bill Evans and others are predicting) that the OCR goes nowhere for the next 12 months or so. Beyond that, it is anyone's guess.

(There's little to be gained by either cutting or raising - so might as well site tight and, if need be, fiddle some more with macro-prudential policy to do some of the things that a previously active cash rate might have done).

But it is also true to say that there are more and more people who see a low interest rate environment as the new normal.

 

Japan has just adopted negative interest rates.

I suspect that we're going to have low rates for longer given the current economic conditions. I'm not convinced that this is entirely healthy, but it could be good for asset prices.

 

Well...here is the way I see it.....the Chinese moved capital out to hide it...

The next move might be back into China as people there lose jobs and businesses and resort to selling assets overseas....

 

US Fed reserve just raised interest rates for the first time after 7 years by 0.5% last December 2015. Now they are seriously thinking of negative rates. Just doesn't make any sense.

Major Central banks decisions will one day end badly resulting in a mother of all collapse (global fiat currency collapse). The root cause of all financial collapse (including shares, real estates, banking) is Collapse in the value of currency due to manipulation of currency through unsound monetary policy of currency supply and interest rates.

The question is how much more ammunition left for major central bankers to be able to aggressively stimulate the global economy?

I guess when nothing works, then let the Blame game begins. Just blame of China slow down and Falling OIL prices.

 

Apparently, financially speaking, Django has already been unchained...

Next country with negative rates could be… Canada?

 

If only someone, anyone could bring back the gold standard so we could all just get along again by paying our way with good to honest gold bullion again just like the Romans and Phoneicians.

 

As a daily commentator, I have to say that Greg McKenna is my favourite atm.

Every week day he does a round up of 6 things he thinks investors need to know - this is from today's report.

NB - he's not saying interest rates will fall further. But, next to those calling for an immediate cut because of the high $AUD or the impending (supposed) recession - commentary like this makes more sense to me.

3. The chances of the RBA easing are growing.

No one thinks the RBA will ease today. And very few think they will ease at all. Even the ANZ recently changed their easing bias back to one of consistent RBA rates at 2% for the next year or two.

But I’m with Tim Toohey, Goldman Sachs’ Australian chief economist, and believe the RBA will eventually need to cut rates in Australia. Not today, and not necessarily because of the high Australian dollar – I’m pretty sure they still think the Fed hike mid-year is coming and will fix that.

Rather, I think the political uncertainty in Australia, coupled with a volatile global market and economic backdrop, means that consumers won’t be so keen to run down savings in this and the next few quarters as they were toward the end of 2015 – see point above. That means the rest of the economy will need to do the heavy lifting and there is little sign that that is in train. The good news is, of course, the RBA can actually ease by 50 points pretty quickly without fear of reigniting the housing price boom now that APRA has the banks where it wants them.

 

There comes a point where monetary policy can't change a country's fate. Only people working hard, and a culture to innovate and create enterprises can. If people are doing neither of these, setting rates at 0 doesn't change the net output. Still so many cows slaughtered, so many cars made, so much steel produced.

Monetary policy can only cushion and support what it's meant to cushion and support, monetary policy. Central bankers around the world have said that repeatedly in past 12 months.

If it were that easy, Africa wouldn't be so impoverished. Just change some rates and print some dollars and wham! Poverty disappears.

 

Yes,the Bank of Japan is a leader in central bank experimentation.

See this chart:

While I expect US Fed Reserve Interest Rate to be on Hold. BOJ will offer more Stimulus.
Will BOJ launch operation Helicopter Money?

Helicopter money 'the obvious solution' to boost economies

Even lower negative rate?

 

The root of the problem is IMHO the high debt the countries are all raking up and the interest payment that just keeps adding up. It may seem smart to attempt to try do monetary easing and use GDP to outgrow the debt, but if governments keep going overbudget and piling on the debt without fiscal discipline, there is no way that is going to succeed in the longer term.

The negative rates in Europe and Japan are showing that central bank easing alone is not contributing much to growth at all, all the liquidity just goes to unproductive assets like property. I dun think they are experimenting at all. They probably know its not gonna work, just try to see who can kick the can down the road the longest until the inevitable reset

Same in Australia, if the budget black hole is not fixed, our debt will just continue to go up, rates will become negative and all the extra money sloshing around will just go into stocks or property.

 

With Trump win comes expectations for interest rates to rise ‘bigly’

 

very important, I have been analysing this one watching Fox and my partner thinks Trump said BIGLY .... however he is highly educated man, can not be so.... listened closely over the last week and Trump said BIG LEAGUE.....

Glad I got that one of my chest.

 

If US rates rise which seems likely? we will see the Australian $ tumble... watch this space.

This thread was posted some time ago now, and a lot has happened, we are now seeing banks increasing interest rates.

The game is changing, 2017 will be an interesting year for property investors batten the deck

 

Imagine if the rates did go up; considering our latest GDP figures.....

 

Yes, It seems that this is the Trump effect, every country in the world will raise their interest rate since the USA believe under Mr. Trump will be great again .

Most of the bank in Australia has already increased the IR despite RBA is not increasing it yet.

 

The trump effect is only going to be short lived. Spending on infrastructure will boost the economy for a few years but unless fundamentals change, we will end up in the same place a few years down the track. There is even some serious talk about not inaugurating him(Russians hacking elections which is think is lots of bull...) so my bets are not high on a great US era coming ahead...

Lower rates wouldn't last forever for sure but still, it would have been a great missed opportunity if one didn't use those low rates in the past 3 years or so to either pay down debt or save more for rough times ahead or for investing more in the future.

 

While the RBA may keep rates low, the spread is going to only get larger with banks having to cover the extra costs of capital, with the double-edged sword of increased regulatory requirements and overseas borrowing costs. I wouldn't be surprised to see mortgage rates rise a full 1% in 2017, even if the RBA leaves them flat.

Hope people are prepared!