Speech from Reserve Bank of Australia Deputy Governor Guy Debelle
- Says global asset prices depend on rate structure remaining low
- Equity prices assume global economy can grow strongly without pick up in inflation
- Says investors should question how long such a "benign conjuncture" can last
- Global monetary stimulus will unwind as world recovers, lift short-term yields
- "Minimal compensation" in asset prices for uncertainty about the rate outlook
- "Puzzling" that there is little compensation for duration in the rate structure
- Says expects to see repricing of assets if rates continue to rise
- Recent spike in equity volatility a "small example" of what could happen
Sometimes central bankers speak in low-key, reticent terms on matters to do with their outlook and/or policy. Debelle sticks out as one who is often a little more blunt and forthcoming.
These comments on risk for equities are pretty blunt. And, he is not alone amongst central bankers warning of what is around the corner. In case you need an even blunter guide:
- more rate hikes are coming globally
- this is big risk for equities
- equity price falls are coming as rates rise
This is the message many central bankers (and others) are warning of.
Oh yeah, nothing much direct on the Australian dollar in his speech. AUD is part of the 'risk' complex though, so a warning (if indirect)
Full text: Risk and Return in a Low Rate Environment
