The end of rate hikes?

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It’s getting amusing watching the market of interest rate forecasting, which is desperately grappling with historically atypical conditions, from the AFR:

“The growth and inflation outlook suggests the RBA sees no threat of a rate hike until at least 2018,” Macquarie Research analysts said in a note to investors.

…ANZ senior economist Justin Fabo said he was confident there would be no rate rises for at least 18 months.

…Economists at AMP Capital Investors and Merrill Lynch told Bloomberg they expected a rate rise, to 2.25 per cent, in early 2016.

Several analysts are predicting a further cut, to 1.75 per cent in August, including Capital Economics, Morgan Stanley and Macquarie Research.

NAB also said the next move in rates is up.

The MB view is that all are wrong. By 2018 I expect rates to be at 0.75% and possibly lower if the world is mad enough. The cause is simple, Australia is part way into an historic unwind of the mining boom followed by an unwind of the housing boom.

The only trigger I can see for rate hikes for as far as the eye can see is capital flight.

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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.