Earlier this month the futures market had resulted in an interest rate hike, maybe even two, before the end of the year. However, a cut is now witnessed as highly probable.

The market depicts the expected average level for the cash rate, mandate by the Reserve Bank of Australia (RBA), reducing from its current 4.5 per cent to a low point of 4.35 per cent though October.

That suggests a better-than-even chance of an interest rate reduction to 4.25 per cent by that time.

On May 5, the day following the RBA raising the cash rate to 4.5 per cent from 4.25 per cent, the futures market fully priced in further a rise touching 4.75 per cent in September.

Also, the benchmark rate was speculated to continue surging beyond that, touching 5.0 per cent by the end of the year and 5.25 per cent by the middle of 2011.

The turnaround was prompted by a spate of factors. The first was the RBA’s note, issued following its board meeting on May 4, that the latest move had increased the rates facing most borrowers to ‘‘around average levels’’.

When the minutes of the May 4 board meeting were unveiled, the suspicions grabbed some possibility with the RBA’s remark that the hike on May 4 would render monetary policy well positioned for the present.