AUSTRALIA clocked the fastest growth in the developed world outside Europe last year, commodity prices are rallying and the government's in no hurry to return the budget to surplus. So why are traders still pricing in an interest rate cut in the coming 12 months?
One reason is the Federal Reserve. With chair Janet Yellen triggering declines in the US currency in recent weeks, her Australian counterpart Glenn Stevens has to contend with an appreciating local dollar that clouds the growth outlook Down Under. As a result, while markets and economists expect no change at the Reserve Bank of Australia's policy meeting on Tuesday, traders are pricing in another easing in the next year.