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Investors betting on interest rate cuts akin to gambling

There has been a frenzy on the money markets with investors trying to predict when central banks will cut interest rates next year

All eyes are on Christine Lagarde, president of the European Central Bank, to predict when interest rates will be cut next year. Picture: Bloomberg

There are times when its difficult to differentiate the activities of financial markets from that of gambling. The current frenzy in money markets where investors are placing larger and larger bets on when they expect central banks to begin cutting interest rates is just the latest example of behaviour that looks very close to old fashioned gambling.

There is now broad consensus among investors that interest rates will be lowered in some shape or form next year, especially after the US Federal Reserve (Fed) essentially confirmed it would lower rates next year.