How to calculate RBA rate probabilities from cash rate futures

The market-implied probability of an RBA rate move comes from one futures contract: the ASX 30 Day Interbank Cash Rate future for the month of the meeting. Its price tells you the average overnight cash rate the market expects for that month. Split the month at the day the new rate takes effect, and whatever part of that average the current rate cannot explain is the priced share of a 25 basis point move.

That is the same logic as the fed funds probability calculation, and it is the method behind the ASX's own RBA Rate Tracker. Two details decide whether your number matches: which day the split happens on, and which rate you treat as "current". Both are easy to get wrong, and from 2020 to 2023 one of them was worth a probability error of ten points or more.

The contract and what it settles on

The ASX 30 Day Interbank Cash Rate future is quoted as 100 minus a yield. Per the ASX factsheet, it settles against the monthly average of the Interbank Overnight Cash Rate published by the Reserve Bank of Australia: the sum of the daily rates divided by the number of days in the month. On weekends and public holidays, when no rate is published, the previous business day's rate is used. So the average runs over calendar days, not trading days.

Monthly contracts are listed up to 18 months ahead. For a single meeting you need only the contract for the month the meeting falls in.

The formula

The ASX publishes its method in one line. Written out with the two pieces of the month:

X = r_old x (days before) / (days in month) + [r_new x p + r_old x (1 - p)] x (days after) / (days in month)

X is the implied rate (100 minus the futures price), r_old is the rate in force now, r_new is r_old plus 0.25, and p is the probability of the move. Rearranged:

p = (X - r_old) / (0.25 x days after / days in month)

A positive p is the priced probability of a hike, a negative one the probability of a cut. If the absolute value comes out above 1, the market is pricing more than a single 25 basis point move and the two-outcome model has run out of road; more on that below.

Split the month at the effective date, not the meeting

The RBA's Monetary Policy Board now meets over two days and announces its decision on the second. The new cash rate target takes effect the following day. The RBA's own cash rate table shows it plainly: the decision announced on 29 September 2026 is recorded as a 25 basis point increase to 4.60% effective 30 September 2026. The same one-day lag appears for 12 August, 17 June and 18 March.

So "days before" runs up to and including the announcement day, and "days after" starts the morning after. Counting the announcement day on the wrong side is a small error at the start of a month and a larger one near the end, when the post-decision window is short and every day in it carries more weight.

Use the overnight rate, not the target

The ASX methodology defines the current and new rates as the target adjusted by the differential between the target and the overnight cash rate. That clause is easy to skip, and for years it mattered.

The futures settle on the overnight cash rate, and the overnight rate has not always equalled the target. From the RBA's F1 table, the overnight rate minus the target averaged about -7.8 basis points in 2020, -6.9 in 2021, -4.2 in 2022, -3.0 in 2023, -2.0 in 2024 and -0.7 in 2025. So far in 2026 it has been zero on every day.

Here is what a 3 basis point gap does. In the run-up to the 7 November 2023 meeting the target was 4.10% and the overnight rate 4.07%. The new rate took effect on 8 November, so November 2023 split into 7 days before and 23 after. Suppose the November contract implied exactly 4.07%, meaning the market expected no change:

Using the overnight rate: p = (4.07 - 4.07) / (0.25 x 23/30) = 0

Using the target: p = (4.07 - 4.10) / (0.25 x 23/30) = -0.157

The unadjusted version reports a 16% chance of a cut that nobody was pricing. Run it the other way, with the contract implying 4.13%, and the adjusted calculation shows a 31% chance of a hike while the unadjusted one shows 16%. The error is the gap divided by 0.25 and by the post-decision share of the month, which is why a few basis points turn into a large number. The 4.13% price is illustrative; the rates and dates are from the RBA's published tables.

With the gap at zero in 2026 the adjustment currently changes nothing. It is still worth writing into the calculation rather than assuming, because the gap is a feature of how much cash is in the system, not of the formula, and it has moved before.

A worked example: the November 2026 meeting

As of 30 September 2026 the cash rate target is 4.60%, raised by 25 basis points at the 28 and 29 September meeting, and the overnight cash rate has matched the target throughout 2026. The next meeting is 2 and 3 November 2026, so a change would take effect on 4 November. November has 30 days: 3 before the change, 27 after.

Suppose the November contract trades at 95.355, an implied rate of 4.645%. This price is illustrative; the rates and dates are real.

p = (4.645 - 4.60) / (0.25 x 27/30) = 0.045 / 0.225 = 0.20

So the contract prices a 20% chance of a further 25 basis point hike in November and an 80% chance of a hold. Two quick checks: if you ignore the day split entirely and divide by 0.25 you get 18%, and if you count the announcement day as a post-decision day you get about 19%. Near enough in this case, but the gap widens as the decision moves later in the month.

Chaining to the December meeting

For the 7 and 8 December meeting, the December contract covers 8 days at whatever rate came out of November, then 23 days at the December outcome. The pre-meeting rate is no longer known, so you use the rate the November contract implies after its meeting: 4.60 + 0.25 x 0.20 = 4.65%.

Suppose the December contract trades at 95.260, an implied 4.74%, again illustrative:

post-December rate = (4.74 x 31 - 4.65 x 8) / 23 = 4.771%

That is 0.171 percentage points above today's 4.60%, or about 0.69 of a 25 basis point hike priced across the two meetings combined. The CME-style presentation turns this into a tree of outcomes, meeting by meeting, and the tree logic is walked through in the FedWatch methodology rebuild. The ladder of implied rates across several meetings is what the WIRP-style view plots.

Where the two-outcome model breaks

The method assumes each meeting ends in either no change or one 25 basis point move. When the market is pricing a possible 50 basis point move, a single p cannot describe it. Zac Gross made this point in April 2025, when he published an alternative set of RBA probabilities that spreads the outcome across several possible moves using the history of forecast errors. It is a fair criticism, and the standard fix is the one CME uses: when the implied move exceeds 25 basis points, assign certainty to the first 25 and split the remainder between one and two moves.

The ASX tracker also updates once a day, at the end of trading. If you want the probability after a data release, you have to compute it from an intraday price yourself.

[QUADESTO-EMBED: RBA meeting ladder from ASX 30 Day Interbank Cash Rate futures, one bar per 2026-2027 meeting, hover shows implied overnight rate, effective-date day split and P(hike/hold/cut)]

Same method, other central banks

The RBA version is the closest cousin of FedWatch, because both use one-month contracts on an overnight rate. The Bank of England and ECB versions work from SONIA and ESTR futures with their own contract traps, and the Bank of Japan case has thinner markets and smaller steps.

Where Quadesto fits

If you publish a meeting ladder like this regularly, Quadesto can turn the futures prices you bring into an embeddable chart, with a "Made with Quadesto" credit on the free tier and your own branding on Pro.