The market was pricing in around an 80% chance of a rate cut as of last Friday, and I think the odds are that the Reserve Bank will cut Australian interest rates by 25bps on Melbourne Cup day (tomorrow). Last Monday, an RBA assistant governor Guy Debelle said that if underlying CPI was low, then they would be very likely to cut rates. The underlying inflation rate came in at a 14 year low, so if that’s not enough to push the rate cut through, then I don’t know what is. Global uncertainty has been the one factor holding the RBA back, but with the EZ package being reasonably well received by the markets, this shouldn’t hold the RBA back this time.
Yet there were plenty of analysts and commentators here in Australia over the weekend who felt that the RBA would stay on hold again and wait until December. I personally don’t see any reason why they should wait, but there does seem to be a bit more doubt today that there was on Friday.
All will be revealed tomorrow, just before the race that stops a nation. (Jukebox Jury is my tip)
