“Mad” Adam: Interest rates at bottom

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From Adam Carr at Dad’s Army:

Basically, I think that whatever the cash rate is by June, it’ll be the trough, which means that he window for the next 50bp is quite narrow. There are two reasons for this: firstly, and taken at face value, the Federal Reserve is preparing the world for a tightening cycle sometime later this year.

…As simple as it sounds, that one small decision from the Fed will have a profound impact around the globe: it’ll effectively put an end to the global currency wars, or at least establish some form of hiatus.

…This brings me to the second reason: all in all, most of the domestic economic data out over the last few months has been strong, or at the very least shown an upswing, including in retail spending, building approvals, new home loans, credit, jobs growth, and of course non-mining investment.

For interest rate doves and dollar shorts this is like shooting fish in barrel.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.