INTERNATIONAL interest rate settings, and US interest rates in particular, have a significant effect upon the global economy, financial markets and commodity markets.

In recent years, record low interest rates, in some cases negative interest rates, and unprecedented bond buying programs, or quantitative easing, have been very supportive of asset prices and commodity prices specifically.

Rate rises have been a rare occurrence in the US over the past 10 years.

However, change is now well and truly upon us following last week's decision from the US Federal Reserve to increase official rates for a third time in this interest rate cycle.

Interestingly, three rate hikes within a cycle would typically make a mark on growth and dampen asset prices.

To date, however, the current adjustment has been orderly.

Much of this can be attributed to the Federal Reserve's insistence on a gradual path for raising rates - providing both comfort and time for global markets to adjust.

Having said that, interest rate settings and expectations around the pace of rate hikes will remain an important influence over asset and commodity prices.

As is the case with many US events, the upward trend in rates will have implications for the Australian economy and, in particular, commodities.

Higher US rates imply some downward pressure on the Australian dollar.

This may be welcomed by our local exporters and would likely assist the development of our export sector, which is already enjoying impressive growth in services such as tourism, education and financial services.

All of this combined paints a favourable outlook for both the Australian economy and our export sector.



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