Australia’s markets, which flagged an interest-rate cut most economists missed, are signaling two more reductions as the central bank seeks a weaker currency.
Futures contracts show about 80 percent odds Reserve Bank of Australia Governor Glenn Stevens will bring the target for overnight loans between banks down to 1.75 percent by year-end from 2.25 percent now. Stevens and his fellow policy makers reduced the rate by 25 basis points on Tuesday to a record and said the Australian dollar remains overvalued.
The RBA joined counterparts from Canada to Singapore to Russia in easing policy this year as tumbling commodity prices add to disinflationary pressures. The rate cut weakened the Aussie to within 1.5 U.S. cents of the 75 level Stevens said in December he prefers. Growth will be weaker for longer and the jobless rate will peak higher than earlier expected, he said after Tuesday’s decision.