According to this news article, Saul Eslake, an economist at ANZ bank made the prediction that interest rates in Australia has already peaked and will be ?lower this time next year than they were at the end of 2006.? We looked through the presentation slides (at page 42) that he used in his speech that made the prediction and could not find any rationale behind this opinion.
We guess Eslake?s prediction is nothing more than a guess.
Indeed, the Reserve Bank of Australia (RBA) had dropped many obvious hints that interest rates are more likely rise than to fall (see Rate cut not on the cards says Reserve Bank). We concur with the RBA because we believe that inflation is still a hidden demon that can still rear its ugly head anytime (see Have we escaped from the dangers of inflation?).
However, having said that, we see a possible scenario that may result in a cut in interest rates?a worldwide deflationary slump (see Spectre of deflation) caused by the bursting of asset price bubbles. If that should happen, the US Federal Reserve will have to print money to avert a depression. As we said before in How does the US export inflation?, if the Fed should do that, the rest of the nations are likely to follow suit.
