October is here after the record-breaking heat of September and all the signs point to a hot summer. Things are also beginning to heat up on the global interest rate front.
The US Federal Reserve surprised markets in late September by confirming that not only will it begin winding back its bond buying (or quantitative easing) in October but that it expects to raise official interest rates again in December with three further rate rises in 2018 also on the cards. This is despite persistently low inflation below 2 per cent. The Fed is pinning its hopes on a solid labour market producing higher wages and prices. The US dollar rose slightly on the news, pushing the Aussie dollar back below US80c. The interest rate differential between the US and Australia looks set to widen, with Reserve Bank Governor Philip Lowe confirming in a speech that a lift in rates here is still some way off. Our stubbornly high currency, weak wages growth and booming property market are to blame, although Governor Lowe expressed guarded confidence in Australia’s economic outlook.
Read more from our October update here:
- Introducing the new smart (er?) home
- Expand your horizons with ETFs and LICs
- Retirement villages: Look beyond the brochure