Markets: A tale of two outlooks

The ASX is trading back near the year’s high, while official interest rates are at record lows. So who is right?

The gap between interest rates and equities is the widest it has been in 20 years, with interest rates being the lower bound. The beginning of 2012 marked the beginning of the divergence, with the ASX 200 marching higher and the official cash rate sliding to historical lows.

While it is widely expected the Reserve Bank will keep interest rates on hold today, the gap between the two measures is widening as the ASX continues to climb to recent highs on expectations interest rates will remain low for the time being.

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