Rates reset across the west – six economies, six stories
In this week’s video insight I analyse cash rate cuts across six major economies and their resulting impacts. Australia and the U.S. remain resilient with low unemployment but sticky inflation, while the Eurozone, Canada and New Zealand face weaker growth and rising unemployment rates. On average, cash rates have fallen from 5.0 to 3.25 per cent, with inflation around 2.7 per cent – posing a challenge for savers but offering some relief for borrowers.
For a deeper dive you can visit my blog here: Rates reset across the West
Transcript:
Hi, I’m David Buckland, CEO of Montgomery Investment Management and welcome to this week’s video insight.
Today, I am analysing the central bank cash rates over the past 12-15 months across 6 western world economies; Australia, the United States, the United Kingdom, Europe, Canada, and New Zealand.
Inflationary expectations across these economies illustrate a very mixed report card, with the Eurozone, Canada and New Zealand seemingly having put the inflation genie back in the bottle, as you can see in Table1.
All three economies have aggressively cut interest rates, by around 2.5 per cent on an average 5.0 peak, and their economies remain under pressure from relatively higher unemployment. These moves may provide temporary relief, yet they highlight deeper structural weaknesses that rate cuts alone can’t fix.
In Table 2, we can see that both Australia and the U.S. have shown resilience – enjoying a relatively low unemployment rate, and in each case their inflation rates appear higher and stickier than had been anticipated.
These trends for Australia and the US suggest monetary easing may soon face difficult trade-offs for their central banks.
Over the past 12 months, the six economies, Australia, the US, the UK, Europe, Canada and New Zealand have implemented an average of six interest rate cuts over an average 12 months, ranging from three in Australia to eight in the Eurozone and Canada. On average, rates have been reduced by 1.75 percentage points (from 2.50 per cent in Canada and New Zealand to 0.75 per cent in Australia), bringing the average cash rate down from a peak of 5.0 per cent to 3.25 per cent. And in percentage terms, that is an average 35 per cent reduction.
The impact has varied: in the Eurozone, Canada and New Zealand, lower inflation appears tied to weaker economic conditions and higher unemployment, while in contrast, Australia and the U.S. have remained more resilient, supported by relatively low unemployment but grappling with stickier inflation.
With inflation averaging around 2.7 per cent across these economies, the environment remains challenging for savers whose returns struggle to keep pace, while spenders benefit modestly from lower borrowing costs.
For a deeper dive, head over to the blog where I unpack these numbers in greater detail and pair them with my economic observations.
That’s all we have time for today. As always, please continue to follow us on Facebook and X.
Thank you.
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience.
David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
