Markets see no rate cuts before September

Those who read my Australia’s Bull Trap post this morning will understand that I worry that the current temporary rebound in the iron ore price will delay interest rate cuts. Markets agree that that is the most likely outcome.

The OIS is now signalling only 37bps in cuts for all of 2013:

Bloomie’s implied probabilities for the next meeting strongly favour a hold:

In fact, Bloomie probability distributions see no cuts before August:

The same is apparent in 90 day bank bills with just one cut priced for September:

It’s as I feared.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.