WEEKEND ECONOMIST: European rates trigger

The market is now pricing in a total 140bps of rate cuts, which seems unlikely in light of currently low unemployment. Ultimately, however, the RBA's next few decisions will be determined by developments in Europe.

Following the 50 basis point cut in the official cash rate by the Reserve Bank of Australia in May we revised our cash rate forecast to include two more cuts in the June-August period of 25bps each.
At the time that move was a little bolder than consensus, but positively timid compared to market pricing which had raced to a forecast of total cuts of around 100bps.

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