The Madometer dial is hitting the red zone on rate cuts:
Think about it. Presumably, if the Fed does end up hiking early next year, then some of the factors that led it to delay in the first place, such as its concerns about the global economy and its worries about China — will have abated.
…Yet even if the Fed’s global growth concerns persist, it is still not clear that the Reserve Bank would automatically pull the trigger again. For one thing, many at the Fed appear to have adopted perfection as the benchmark for a rate hike. That taints any risk assessment the Fed offers up. In that regard, it’s noteworthy that the Reserve Bank Governor, Glenn Stevens, doesn’t appear to place the same emphasis, or weight, on these global growth concerns as the US Fed does.
In any case, the RBA has already fired off much of its monetary policy ammunition anyway. At already ultra-low rates, pre-empting weak outcomes (that may not even occur) is a luxury it cannot afford now.
So, rate cuts are coming, not that MB doubted it before. I mean, really, as house prices slow then stall, the residential construction boom rolls over, the vehicle assembly industry folds, the capex cliff steepens and the West descends into Hell, the terms of trade keep marching south, fiscal policy remains too tight and global volatility weighs on the lot, what else is the RBA gonna do?
