Equities have shrugged off dialed back rate cut expectations, with the US not expected to pull the trigger until September and the RBA priced for December if at all this year.
Already a subscriber?Investors are becoming increasingly sceptical that the Reserve Bank will need to cut interest rates at all this year, after more upbeat data in the world’s largest economy reinforced expectations that US borrowing costs will remain higher for longer.
Markets are now speculating that Federal Reserve chairman Jerome Powell won’t pull the trigger on rate cuts until September.The market is now pricing in 71 basis points of rate cut in the US this year, equivalent to two reductions, which is less than the Fed’s own projections of three moves lower. Earlier this year, traders had speculated as many as six quarter-point cuts in 2024.
He added that investors will be focussing on the US earnings season that starts this week to help gauge consumer demand which has been softening. US consumer price index released this week is also expected to show core inflation slowing to 3.7 per cent in March from 3.8 per cent the prior month. The US two-year yield, which moves in step with interest rate expectations, leapt to 4.76 per cent, which was higher than its 10-year counterpart, which rose 10 basis points to 4.2 per cent.That reflects concerns that inflation may pick up and prompt the Fed to keep policy on hold, or even raise rates.
Traders now imply a less than 50 per cent chance of an RBA rate cut as early as August, down from 72 per cent implied by the market last week.
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