Goldman Sachs says the market underestimates the chances that the Reserve Bank of Australia will cut interest rates next week, suggesting interest rates are too high, given that inflation has fallen to within target.

Bond traders say there is just a 7 per cent chance of a rate cut next week and a 73 per cent likelihood by the following month, according to data provided by AMP. That means they broadly expect the RBA to keep the cash rate at 4.1 per cent when it meets on April 1.