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Probability of an RBA rate cut in February continues to decline

The chances of an RBA rate cut in February got dimmer following the release of a better-than-expected Australian inflation data for December. 

The overnight index swap (OIS) market is now pricing just 12% probability of the Reserve Bank of Australia (RBA) cutting interest rates by 25 basis points next Tuesday, according to data tweeted by RANsquawk. 

The markets were pricing about a 20% chance of a rate cut next week before the release of the Australian inflation data. 

In fact, the probability of a February rate cut stood at more than 60% a week ago. The odds, however, dropped following last week’s upbeat employment report. 

Currently, RBA’s interest rate stands at 0.75%. The central bank delivered three 25 basis point rate cuts in 2019 and is widely expected to cut rates in May. 

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