Derivatives market implies 5 years of below-target inflation

Australian fixed-income investors are showing skepticism that the inflation rate will rise back to the central bank’s target range without more cuts to benchmark borrowing costs. While bond yields have rebounded this week as the odds of a British exit from the European Union have decreased, that shift has done little to budge expectations for Aussie consumer prices. Global disinflationary pressures are weighing on the outlook even as unemployment remains in check, and overnight index swaps indicated a 61 percent probability of another RBA rate cut this year as of 5 p.m. Wednesday. (VIEW LINK)

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