Forward Path for Interest Rates Tilts Up
Although the Shadow Board supported strongly holding interest rates at 3.00 percent this month, an upward tilt in the path of interest rates over the next year was advised.
The Shadow Board assessed the probability that rates should be higher in six months at around 1/3, approximately balanced by the risk that rates should be lower. In contrast, the nine experts on the Shadow Board assessed the probability that rates should increase over the next twelve months at over 1/2, with just under 1/3 probability that rates should fall.
Although there is greater uncertainty about interest rates in the longer term, the balance of risks has shifted towards higher rates in the future.