RBA Cash Rate Decrease Now “47% Likely” – Financial Markets

With Australia’s housing crash officially dubbed “the worst since the GFC”, financial markets have started pricing assets on the ASX with a 47% likelihood of an RBA cash rate decrease of 25 basis points (down to 1.25%).

Market expectations of a rate cut are provided by the RBA. Source: asx.com.au

This would break the record for the lowest inter-bank cash rates on record, with the previous record being set at 1.5%, the current rate, having been set and unchanged since August 2016.

This comes as a devastating blow to the outlook for the housing market, given late 2018 saw predictions of a rate rise, reflective of a healthy market, at this time of the year.

Predictions have fallen slightly down from above 60% in the past few days, however the sentiment still strongly suggests a cut is not off the table for the RBA. Source: Asx.com.au

Jobless Rates & Inflation Now In Spotlight

An RBA cash rate decrease will now rest upon data to be reviewed at next Tuesday’s meeting, where the RBA board will assess the jobless rate and consumer price inflation as indicators as to whether a cut is necessary.

Should unemployment rise or inflation fall, the board will have a strong case to suggest that the economy is lagging, and decreasing rates will provide the incentive the markets need.

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