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INTEREST RATE TRENDS

In addition to our regular monthly surveys of projections for over 90 currencies we also undertake a special survey of real interest rate trends in Foreign Exchange Consensus Forecasts (in May and November) for the countries listed below. We present consensus estimates of both short- and long-term interest rates.

G7 & Western
Europe
Asia Pacific Eastern Europe
United States Australia Czech Republic
Japan India Hungary
Germany Indonesia Poland
France Malaysia Slovakia
United Kingdom New Zealand  
Italy Singapore  
Canada South Korea  
Euro zone Taiwan  
Norway Thailand  
Netherlands    
Spain    
Sweden    
Switzerland    


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The table and text commentary below represent a small portion of this special survey taken from our November 2015 issue of Foreign Exchange Consensus Forecasts.



Long Term Interest Rates (% pa) Consensus Forecasts
All yields as of Nov. 9, 2015 10-Yr Government or Treasury Bond Latest Forecasts
In 3 months In 12 months
 Australia 4.25%, April 2026 3.0 2.9 3.2
 Japan 0.40%, September 2025 0.3 0.4 0.6
 Italy 2.00%, December 2025 1.8 1.8 2.1
 Switzerland 1.25%, May 2026 -0.2 0.0 0.4
 UK 2.00%, September 2025 2.0 2.1 2.3
 United States 2.00%, August 2025 2.3 2.4 2.8


US Policy Normalisation in Sight
Global uncertainty continues to fuel FX volatility, which in turn, has affected inflation expectations and decisions regarding interest rates. Around two thirds of our panellists now expect the US to begin its monetary tightening cycle in December (see consensus probabilities in table on front page), following a rebound in employment in October. Yet, as happened in September, some believe that concerns about the resilience of the US recovery might encourage the Federal Reserve to put off a rate hike until early 2016. Much is dependent on data releases during the next few weeks, as well as international risks and policy trends (notably the European Central Bank decision on a possible expansion of policy accommodation). Movements in the US dollar will be closely monitored as an appreciation of the currency could hamper the competitiveness of US exports. US bond yields (which are inversely related to price) have started to climb in response to a possible start to rate normalisation, which might shrink liquidity. However, the likelihood of additional stimulus from the European Central Bank has depressed the German bund and the returns on other long-dated government assets across the euro zone. Short term rates in Sweden and Switzerland are expected to be negative over the 3-12 month horizon.

A portion of the analysis from Foreign Exchange Consensus Forecasts, November 9, 2015.