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Financial markets braced for cash rate cut

Financial markets are more than fully priced for an interest rate cut by the Reserve Bank of Australia when its board meets next month.

Recent speeches by the RBA’s executive, including governor Philip Lowe, have fuelled speculation of a further easing in monetary policy, which has seen interest rate futures imply a cash rate of just 0.06 per cent.

The cash rate has sat at a record low 0.25 per cent since March.

RBA Deputy Governor Guy Debelle returns to the lectern on Thursday to deliver a speech to a foreign exchange conference.

In recent addresses Dr Debelle and Dr Lowe have said the board is considering ways to support the economy and employment growth and believe a policy change would gain more traction now as COVID-19 restrictions are lifted.

Economists expect a cut in the cash rate to 0.10 per cent from 0.25 per cent at the November 3 board meeting and similar reductions to its three-year bond target and the Term Funding Facility rate for banks.

There is also speculation the RBA would start buying longer-dated bonds other than three-year issues, to keep market interest low while providing liquidity to the finance system.

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