The market’s bet on a rate cut by the start of next year will be tested when the Reserve Bank unveils the rationale behind its latest decision to keep the cash rate on hold.

Traders will pore over the minutes from the RBA board’s June meeting when they are released on Tuesday as they hunt for any indication of the central bank’s future plans.

The rates market has almost fully priced in a 25 basis point cut by January and three 25 bp cuts by mid-2025.

That’s a much more optimistic assessment than the hawkish tone struck by RBA Governor Michele Bullock of late, said IG market analyst Tony Sycamore.

“Speaking to a parliamentary panel last week, she stated it would be ‘premature to be thinking about rate cuts’,” Mr Sycamore said. 

“We expect that the RBA meeting minutes will echo this hawkish sentiment.”

Fears of a resumption to monetary tightening have eased after recent indicators showed the economy was indeed cooling, even though inflation was still coming down slower than hoped.

But the RBA maintained it was not “ruling anything in or out” in the monetary police statement accompanying its latest rates decision.

Of most interest to analysts in the minutes will be seeing how close the board came to raising rates again and what arguments they considered either way, said ANZ economists Brian Martin and Daniel Hynes.

This post was originally published on Michael West.