How are futures markets seeing the interest rate decision?

Fairly conclusive then, with the chances of rate cut to 2.50% being 100% priced in.

Does that mean that there is 0% of chance of interest rates staying on hold? 

Not quite. 

August 2013 cash rate futures contracts are trading at 97.455, so what it essentially means is that a 50bps  (0.50%) cut to 2.25% is considered to be as likely as rates staying on hold at 2.75%.

On balance, therefore, a 25bps (0.25%) cut to a record low of 2.50% cut is the red hot favourite outcome today.

No comments:

Post a Comment