Goldman Sachs gave up on its rate cut call for this year last night, beating me to it after the Glenn Stevens testimony yesterday which clearly showed the RBA is waiting for Godot. I no longer expect a rate cut before Christmas either given my outlook for iron ore isn’t too dour until next year. However, MB is not lifting its easing bias, and still expects the next rate move to be down given the terms of trade shock will roll on and the risks presented in China are growing not receding.
It’s worth revisiting the key statements from yesterday by Captain Glenn:
The low returns on offer on safe investments in Australia, and the ultra-low returns on such assets internationally, are certainly having an effect by prompting investors to ‘search for yield’. Not only are returns on financial instruments low, but yields on the existing stock of physical assets – houses, commercial property, infrastructure assets – are being bid down. Some of that search is of course coming from offshore.
