Chart: Markets continue to bet on a further rate cut from the RBA

While Australia’s big four banks all expect the RBA will leave interest rates unchanged for at least the next 12 months, financial markets aren’t so sure.

The chart above, supplied by Westpac’s senior currency strategist Sean Callow, shows the market probability of a 0.25% interest rate increase from the RBA within six months.

Markets currently see a 50% chance that the RBA will cut interest rates by a further 0.25% by the end of 2015. A little over a month ago this was seen as a near-certainty.

Looking further ahead, Callow notes the probability for a 0.25% interest rate cut increases to 75%.

Who will be right, a majority of economists or the wider market? Time will tell.

For the record Westpac expects rates to be kept on hold until at least the end of 2016.

You can follow the Westpac economics team on Twitter here.

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