RBA meeting ‘live’ after Brexit

Futures markets are now pricing in a more than 50 per cent chance of a July rate cut.

The Reserve Bank’s July board meeting has suddenly become ‘live’ after Britons voted to separate from the European Union.

The stunning and historic vote has left a trail of destruction on markets, with only safe havens such as the Japanese yen and gold rising amid the carnage.

In the eyes of investors this means there will be major consequences for the global economy and, potentially, force the RBA to trim rates to a new record low at its next meeting on July 5.

Futures markets are now pricing in a 53.3 per cent chance of a cut, up sharply from a mere 19.6 per cent chance on Thursday.

“While it’s difficult to foresee the exact Brexit fall out, there’s now a chance we see a RBA rate cut at the July 5 meeting and were that to happen another one or two more rate cuts could follow it in 2016,” IG market analyst Angus Nicholson said.

Should the RBA act it would push the cash rate down from its current record low of 1.75 per cent to 1.5 per cent.

The chances of a cut by August have risen from 37.2 per cent to 69 per cent.

Analysts had been expecting the RBA to wait on inflation data on July 27 before deciding whether more stimulus would be required, hence why the August meeting held a much greater chance of a cut than the July meeting prior to the Brexit poll.