Westpac Economics' Weekly Video Update

Overnight the FOMC decided to hold fire on rates for the time being, giving the global backdrop and the associated implications for inflation a greater weight than they have in the past. While they likely hope that global growth will strengthen and market volatility will calm, there is no guarantee. Indeed, through the end of 2015 and into 2016, there is every reason to believe that these concerns will persist. Nonetheless, on the information to hand, it looks as though the FOMC will now target a December start date for policy normalisation. Their distinct lack of confidence raises a big question over the path for rates beyond that first hike. Back in Australia, Governor Stevens address to the Economics Committee of the House of Representatives covered typical themes seen in past communications. They remain constructive on the outlook and plan to wait out global developments and the continued unwind of the mining investment boom – as long as the unemployment rate remains broadly stable.