Markets vs Economists: RBA Rate Decision Looms with Uncertainty

Financial markets are pricing in a greater-than-even chance of another interest rate rise this month, despite the overwhelming majority of economists expecting the Reserve Bank to hold. The OurTop10 Rate Prediction Index currently puts the probability of a hold at 62.4 per cent and the chance of a 0.25 percentage point rise at 35.6 per cent.

The Reserve Bank of Australia is more likely than not to leave the cash rate at 4.35 per cent when it meets on September 29, according to the index. However, there is a striking disagreement between economists and financial markets, with market pricing implying a 54 per cent chance of a rise.

OurTop10 Head of Research Mansour Soltani said the divergence was significant, noting that 'one of them is going to be wrong.' He added that 'on these numbers a rise is better than a one-in-three shot. That is not something you leave out of the household budget.'