Daily Commentary BY THE CURVE TEAM –

Slight Shift in Fed Outlook

18th of March, 2021

The Fed’s latest update showed a slight shift in their expectations.

The update itself bore no new surprises. The cash rate is expected to be on hold until 2024 and QE purchases will go ahead as expected.

Markets had a mute response given this update was largely expected. However, an update of note was the number of members predicting a cash rate rise earlier than 2024.

7 of the 18 members now expect a rise before 2024, whereas this number was 5 in December. This follows an updated forecast which has GDP rising 6.5% in 2021 vs the previous forecast of 4.2%.

Australia also had an update from the RBA yesterday in the form of a speech from the Assistant Governor Chris Kent. The topic was small business lending during the pandemic.

Despite Lowe earlier in the week emphasising the importance of innovation and investment, as well as RBA and government schemes encouraging lending to small businesses, lending has not picked up since the pandemic. Kent highlighted difficulty accessing finance and an uncertain outlook as the main reasons for the sluggishness.

Today labour force stats for February are released. 30 000 new jobs are expected to be gained, but there could well be more following the strong payrolls on Tuesday.

David Flanagan

Director - Interest Rate Markets