Australia's central bank is set to extend the developed world's steepest interest rate cuts after banks failed to match its reductions, blunting their impact.

The Reserve Bank of Australia probably will lower its cash rate to a record-low 2.75 percent by February, from the current 3.25 percent, interest-rate swap prices show. The nation's four biggest lenders, accounting for 85 percent of the bank mortgage market, have withheld about a quarter of the RBA's 1.5 percentage points of cuts since November.

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