A vast majority of traders are expecting the Reserve Bank to cut Australia’s cash rate next week, with August cash rate future prices putting the likelihood of a cut at 94%.
A 25bp August rate cut will bring Australia’s cash rate to a new record low of 2.5%.
Rate cut expectations crept up to 74% last week but were propelled past 90% on RBA Governor Glenn Stevens’ Tuesday comments that the end of the mining boom could lead to “quite a big fall”, and that there was still room for more interest rate cuts.
Here’s how traders’ expectations have tracked:
According to HSBC chief economist Paul Bloxham and economist Adam Richardson this morning, the RBA is likely to cut rates next week to encourage the AUD to fall further.
The economists note that inflation is low and jobs growth is slightly below trend, with the unemployment rate rising to 5.7% in June.
NAB economists expect two rate cuts this year, bringing Australia’s cash rate to 2.5% next week and 2.25% in November.
The AUD was trading at $US0.8938 just past 10am.
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