Weekend Economist: Down, then Up!

Weakness domestically early in 2015, strength internationally in 2016; when it comes to rates, the market is underestimating these two themes.

In early December we revised our interest rate outlook. We still expect rates to be on the rise in 2016 as the world economy gathers considerable momentum but we now expect the RBA to cut rates further in the early months of 2015 in an effort to bolster domestic demand and lower the Australian dollar before evidence around the world economy becomes clearer around the middle of the year.

We expect a 25 basis points rate cut at the February board meeting and another one to follow in March.

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