Markets pricing in the end of the easing cycle

The credit union group (CUA) announced that it has cut its fixed rate mortgages for 1,2 and 3 years to just 4.89% p.a.

And yet, the futures markets seem to finally be turning a little more optimistic on the Australian economy.

The ASX implied yield curve of the 30 Day Interbank Cash Rate Futures suggests one more 25bps cut to a record low cash rate of 2.50% by the end of the 2013.

But the yield curve implies that monetary policy should by then be starting to bite, and perhaps a weaker Australian currency may see some inflation back on our shores.

Meanwhile the RBA also takes the optimistic view in forecasting that for the year ended December 2014, GDP growth will be trending up again to 2.5%-3.5% following a potential preceding dip.

Futures markets have now priced in interest rates rising back up to 3.00% by November 2014. 

Source: ASX

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