The combination of these persistent downside risks and continuing low rates of inflation has led investors around the world to expect interest rate reductions by all the world’s major central banks. In Europe and Japan, official interest rates are already negative but investors are expecting the central banks to go further into negative territory.
And in the United States, investors are expecting a substantial reduction in interest rates over the period ahead. This is quite a different world from the one we were facing earlier in the year. What all this means for us here in Australia is yet to be determined.