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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 2016 issue of Foreign Exchange Consensus Forecasts.



Long Term Interest Rates (% pa) Consensus Forecasts
All yields as of Nov. 7, 2016 10-Yr Government or Treasury Bond Latest Forecasts
In 3 months In 12 months
 Australia 4.75%, April 2027 2.4 2.1 2.2
 Japan 0.10%, September 2026 -0.1 -0.1 -0.1
 Italy 1.25%, December 2026 1.7 1.4 1.5
 Switzerland 1.25%, May 2026 -0.3 -0.3 -0.1
 UK 1.50%, July 2026 1.2 1.2 1.4
 United States 1.50%, August 2026 1.8 1.9 2.3


Divergent Policy Trends
In the current climate of high risk aversion, a hike in US rates may have major repercussions for global shares, currencies and dollar priced commodities. A high probability is attached to US monetary tightening next month, but a delay until early 2017 has not been ruled out, dependent on the potential fallout from the presidential election over the next few weeks. Yet the uncertainty that exists over the timing of the rate move is greater than the shape of the rate path, which is expected to be shallower than in previous cycles. Policy caution reflects external headwinds and the sluggish recovery in the US economy, which expanded 2.9% (q-o-q annualised) in Q3, following a weak performance in the first half of 2016. In our latest survey, the consensus is predicting a full year growth differential between the US and the euro zone of +0.1 percentage points in favour of the latter. A revival in the US expansion is expected next year, which should provide firmer guidance over future policy normalisation. In contrast, most countries in Europe face a high level of uncertainty in 2017 due to Brexit, the migrant crisis and key elections in France and Germany. Negative deposit rates may remain in place for some time in the euro zone and Japan, due to low inflation. Certainly, ultra-accomodative short term policy positions are likely to be extended, as suggested in the weak forecasts for 10 Year Government Bond Yields.

A portion of the analysis from Foreign Exchange Consensus Forecasts, November 7, 2016.