Australia’s central bank faces pressure to resume interest-rate cuts as the economy suffers for its dependence on iron ore, which accounts for more than $1 out of every $5 of export income.
Traders see 64 percent odds Governor Glenn Stevens will cut the overnight cash rate target by a quarter percentage point to 2.25 percent within 12 months, the strongest chance since September 2013, a Credit Suisse Group AG index based on swaps shows. Money markets and economists see no move at tomorrow’s Reserve Bank of Australia meeting.
“The risks for the Australian economy are tilting to the downside,” said Guy Bruten, an economist at AllianceBernstein. “There’s a growing prospect that the RBA may well need to cut” as analysts are underestimating a collapse in commodity prices that is likely to be “deeper and broader” than expected, he said.
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