© Reuters. FILE PHOTO: The logo for the Commonwealth Bank of Australia adorns their head office in central Sydney
SYDNEY (Reuters) – Economists at the Commonwealth Bank of Australia (CBA) (AX:) expect the country’s central bank to hold interest rates at a record low 0.25% at its Oct. 6 board meeting, in contrast to calls for a cut from its two major rivals.
Financial markets are pricing in a 60% chance of a cash rate cut by the Reserve Bank of Australia (RBA) to 0.1% from 0.25% now. Yields on three-year government bonds have dropped to 0.2%, implying a 33% chance that yield curve target is also lowered to 0.10% from 0.25%.
“So the meeting is clearly ‘live’,” wrote Gareth Aird, CBA’s head of Australian economics, adding the RBA will leave policy rates unchanged next month.
“We believe the RBA will be acutely aware that the potential costs and risks of (easing) at this juncture outweigh the potential benefits.”