The last time Fairfax Media spoke to Alberto Gallo, Algebris' head of macro strategies, he was predicting that Australia would be swept along by what seemed at the time a relentless trend across developed markets towards zero policy rates.
That was May and the RBA had recently cut its cash rate target to 1.75 per cent. The central bank under then-governor Glenn Stevens cut once more to 1.5 per cent in August before hitting the pause button. A "neutral" stance that seems now ingrained under new boss Philip Lowe.
No surprise then that these days the London-based Mr Gallo is no longer predicting further heavy falls in the RBA's cash rate target.
So what happened?
"We had a reversal in global interest rates, which is stronger than the local dynamics," Mr Gallo says simply. This reversal "was driven by Trump and the general rise of nationalist politics and government spending, which has reflated bond markets at the long end of the [yield] curve".
In other words, and as he says, "the monetary policy tide has turned".
"We are not talking about hyperinflation and very high interest rates," Mr Gallo says. "But the for the time being, effectively the Bank of Japan is the only central bank that remains on an easing footing.
"If you think about the policy rate in Australia I don't think there is room to increase it very soon, because of leverage we have in the system. We are bit stuck in an environment where it's not easy to increase it, which is similar to other economies."
Mr Gallo reckons the US Federal Reserve's funds rate will top out at around 2 per cent at the highest, a mere four further quarter percentage-point hikes. "In theory, they could get to an equilibrium rate of 3-3.5 per cent, but I'm a bit more conservative."
The Bank of England has turned more hawkish, and the ECB will "gradually normalise interest rates" in the coming 12 months, Gallo says. And he believes that this process should come before the European Central Bank starts reducing its quantitative easing program - in effect, the reverse sequence to the Fed.
"In Europe, bank lending is more important, and it's not profitable if interest rates are zero," he explains. "So if in three or six months rates do become a bit more positive, then banks are more incentivised to lend.
"The other reason is that if you do [QE] tapering first it puts extra pressure on France and Italy's long-term funding costs, and as a result you worsen the situation for countries that are more comfortable with low bond rates," he says.
"The bottom line is, I don't think we are heading for a very high interest rate environment. We are heading towards a normalisation in the economies that have de-levered. The US has de-levered the most in the private sector. The UK has not de-levered, and Europe has de-levered to some extent but" - and this is crucial for Mr Gallo - "markets have only priced in the US reflation story."
That means there are likely to be more opportunities in Europe than in the United States where investors are complacent about the potential negatives around US President Donald Trump's policy agenda.
Europe, Gallo says, "is at a sort of crossroads, where you have the populist wave which is clearly not winning". He points to the defeat of the Dutch far-right in recent elections, and expects Marine Le Pen of the anti-immigrant, anti-euro National Front to be defeated in the second round of presidential voting in May.
"But if politicians don't act in the coming years then you might have a breakdown there as well," Gallo warns.
There is also a generational aspect to the way advanced economies are largely shying away from wholesale change.
"Trump and Theresa May are from the boomer generation, a generation that engineered the support for public debt. And what the baby boomers are trying to defend is the old world based on debt and heavy industry and infrastructure and manufacturing, they are not trying to increase innovation or new businesses.
"But manufacturing is not going to come back because you're not competing [in the US case] with Mexican workers, you are competing with robots.
"What we need is something different."
