This edition of Oliver’s Insight looks at the latest round of quantitative easing announced last week in the US. The key points are as follows:
- Open ended quantitative easing (QE3) in the US is likely to continue into 2014. While it can’t solve all America’s problems it should help economic growth recover to 2.5% in 2013.
- Notwithstanding inevitable corrections, QE3 is positive for shares, commodities, gold and cyclical stocks.
- QE3 is likely to result in modest upwards pressure in bond yields.
Meanwhile in Australia, the minutes from the RBA’s last rate setting meeting revealed a somewhat more dovish tone than indicated by the post meeting statement released straigh after the meeting, with significant discussion regarding the risks to global growth and China in particular, the risks to the mining boom and even the observation that the benign inflation outlook provides scope to ease policy if needed.
We remain of the view that the RBA will cut the cash rate to 2.75% over the next six months, starting with a 0.25% rate cut next month. To read the full article, click here.