Kouk: Ready yourself for rate hikes

Ah Kouk. His quaint faith in the power of interest rates had served him well. Until now, via Domain:

St George economist Besa Deda said if they have gone to 0.5 per cent then the RBA will start thinking of other ways to get the economy growing rapidly.

“It is our belief the RBA will only resort to alternative measures of stimulating economic activity if cutting interest rates no longer has the desired impact of bolstering both economic growth and inflation pressures. The RBA will not take on quantitative easing lightly,” she said.

…But Stephen Koukoulas, who was one of the few economists to tip the RBA would be cutting interest rates this year, said people should start preparing for when rates have to rise.

He said believes the RBA is now at the bottom of the cycle and will sit tight for the next 9 to 12 months.

“It is probable the market will be pricing in the risk of a monetary tightening from around the middle of 2020,” he said.

If interest rate rise again in my lifetime then I will surprised. The notion that they are going to rise in 2020 is laughable.

Domain went on with other discussions with economists:

St George economist Besa Deda said recent interest rate cuts to a new record low of 1 per cent should help foster employment growth and lower the unemployment rate, but the structural changes caused by technology and globalisation had put a “cap” on wages.

…Stephen Koukoulas from Market Economics was the only one of the economists surveyed to explicitly back the Treasury forecasts.

“They look about right,” he said.

At least he’ll have the external shock to blame.

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