Former Reserve Bank governor Ian Macfarlane has told bond traders they will be wrong yet again in betting that the central bank will be cutting interest rates before the end of next year.
“The market has a habit – ever since interest rates began to rise in the middle of 2021 – the short-term yield curve has always shown a peak and a fall within a year... and they have been wrong every time,” he said before predicting they would be wrong again.
He described the surge in long-term bond rates to 16-year highs earlier this month as “fascinating” and could be attributed to central banks accompanying rate pauses with hawkish rhetoric.“The word is mightier than the deed,” he said. “The jump in bond yields has tightened financial conditions more than if they had one increase the Fed funds rate and a neutral statement. This is a classic example of where communications have a very big effect.
“So just about anyone qualifies and just leaves us in more confusion as to who the part-timers will be.”on the board with former Fair Work Commission president Iain Ross and former AustralianSuper chairwoman Elana Rubin demonstrates the range of candidates that could be appointed.