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The state of global interest rates – the tide has turned

Chris Towner, director at financial advisor JCRA, says that Q4 this year is expected to be a busy one for interest rates. He says: “If you cast your mind back to the last Christmas holiday period, we had the ECB deciding to halt its quantitative easing programme of bond purchases after spending €2.5trn and we were expecting further rate hikes from the US into 2019.”

Regarding the US, Towner adds: “As is often the case tides turn quickly in the financial markets. There has been talk of the need for a 50bps rate cut for a while. However, over the last couple of weeks the economic data releases from the US have reduced the likelihood of this happening to 15%. So, a 25bps cut looks almost like a done deal with an 85% probability.”

Further afield we have seen far more dramatic shifts in interest rates. “Australia for example has normally been considered to have a currency with an attractive yield. This is no longer the case and we were reminded of this by RBA Governor Lowe last week when he threatened further loosening of monetary policy with rates possibly heading as low as 0.5% into 2020.”

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