13 February 2017

Over the past week Australian shares were 1.8% higher. Shares in developed countries were 0.5% higher with the US market 0.8% higher. Shares in emerging markets gained 1.2%. The Australian dollar was 0.1% lower at 76.74 US cents. The 10 year bond yield in Australia was 0.09% lower at 2.70% while in the US, the 10 year bond yield closed the week 0.06% lower at 2.41%. The oil price gained 0.1% to 53.86 US dollars per barrel.

The Reserve Bank of Australia (RBA) recently released their quarterly Statement on Monetary Policy. Always full of rich information, there's one table that I particularly wanted to share with you. It looks at interest rates, known as ‘monetary policy’, in different countries around the world.

Interest rate table for web

We can make a number of important observations:

  • There is a large deviation of 13.75% in interest rates around the world, with Brazil at 13% against Switzerland at -0.75%.
  • Each country and region has their own economy which, while influenced by broader global economic conditions, might be dominated by its own local issues. We can see that while the last interest move for 18 countries was down, for four other countries the move was up.
  • Interest rates are not always changing frequently, yet the amount of media speculation might lead you to think otherwise. While two countries, Brazil and Chile, have changed interest rates this year, many countries haven’t changed interest rates for a fair while. Switzerland last changed rates over two years ago in January 2015.

Economic conditions generally change slowly, especially for more developed countries. We think it’s difficult to make short term economic forecasts and even more difficult to forecast markets in the short term. Hence our focus on generating long term forecasts and constructing portfolios to deliver good retirement outcomes for members.

Signing off
David Bell

Past performance isn't necessarily an indicator of future performance.
All data sourced from Bloomberg.