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| Version 0 | Version 1 |
|---|---|
| Reserve Bank interest rate decision – live updates | Reserve Bank interest rate decision – live updates |
| (34 minutes later) | |
| 2.49am GMT02:49 | |
| 2.44am GMT02:44 | |
| A major reason for the low inflation figures was a fall in the prices of goods we buy from overseas. The price of “tradables” – goods and services whose price is determined overseas rather than here (as for example is the case with things like health and education costs) – fell 0.3% in the past 12 months. | |
| One of the biggest falls was in the price of communication products (which as an aside, surprised me, given the price I had to pay for my latest phone!), but also petrol fell 1.7% in the past quarter. | |
| But while the rise and fall of tradable prices is largely out of our hands, the movement of prices of non-tradeables is a very good indicator of demand in the economy, and it’s pretty weak: | |
| Growth of 2.6% is pretty much at levels you’d normally associate with recessions – and it is just above where it was during the GFC. | |
| So the RBA doesn’t have to worry about cutting rates setting off inflation – the big question is whether it thinks cutting rates will have much of an impact. | |
| 2.40am GMT02:40 | |
| The big factor in play at the moment is inflation. Last week’s consumer price index figures had it growing at just 1.5% – well below the RBA’s 2%-3% target band. | |
| The RBA’s “core inflation” figures, which take out some of the more erratic price movements were both low as well – the trimmed mean was running at 2.1% and the weighted median at 2.2%: | |
| Since the GFC, inflation has been dead around the world, and thus around the world central banks around the world have been trying to get inflation going by way of cutting interest rates. | |
| 2.39am GMT02:39 | |
| Before we look at the things the RBA will be considering it is worth remembering where we are at. Even with recent rises in mortgage rates by the big four banks, the standard variable rate is still at an astonishingly low level: | |
| At 5.45% it is at a level lower than any time since July 1968 – a time so long ago that people literally could not whinge by saying “they can put a man on the moon but they can’t...”. | |
| A cut today would see the average fall to 1964 levels – a time when people could say, so this band The Beatles, you reckon they’ll be more than flash in the pan? | |
| 2.29am GMT02:29 | |
| The first Tuesday in November is synonymous with horse racing, but has also been associated with a number of interest rates decisions. From 2006 to 2011 the RBA either cut or raised interest rates every November. Most famously in 2007 during the election campaign it increase interest rates, which dealt the then Howard government a massive blow to its already slim chances of winning the election. | |
| Today’s decision will have little political impact – for so long have we had low interest rates that the mantra of “interest rate will always be lower under a...” has pretty much been consigned to the scrap heap. | |
| This time last week there was little likelihood that the RBA would cut rates, but after the weak inflation figures last Wednesday today has become a “live decision” with the market unsure of what the RBA will do. | |
| After the inflation figures came out, the market was factoring a 67% chance that the RBA would cut. Since then things have cooled down a bit, but the odds of a rate cut are still shorter than you’ll get on the favourite for the cup. | |
| 2.27am GMT02:27 | |
| The markets | |
| Looks like the markets fancy No Change. The ASX/S&P200 is up 1.25% at 5,230 points after getting a bit of a hammering yesterday thanks to another bad day for bank stocks. The dollar is also up at US71.68c, suggesting traders don’t expect Glenn Stevens and his cohorts to cut. | |
| Anyway, I’m handing the main stage to Greg now. | |
| 2.20am GMT02:20 | 2.20am GMT02:20 |
| The odds | The odds |
| On this day of all days it’s appropriate to have a look at the betting on the RBA decision. | On this day of all days it’s appropriate to have a look at the betting on the RBA decision. |
| According to Sportsbet, the eternal runner No Change is the favourite at $1.35, followed by Quarter Point Cut at $3 and then More Than Quarter Point at $11. At the back is Quarter Point Increase at $34 and finally More Than Quarter Point Increase at $101. | According to Sportsbet, the eternal runner No Change is the favourite at $1.35, followed by Quarter Point Cut at $3 and then More Than Quarter Point at $11. At the back is Quarter Point Increase at $34 and finally More Than Quarter Point Increase at $101. |
| 2.15am GMT02:15 | 2.15am GMT02:15 |
| Good afternoon | Good afternoon |
| Good afternoon and welcome to our live blog on the RBA’s monthly monetary policy decision. After two rate cuts this year already, will the board go for the hat-trick on Melbourne Cup day? | Good afternoon and welcome to our live blog on the RBA’s monthly monetary policy decision. After two rate cuts this year already, will the board go for the hat-trick on Melbourne Cup day? |
| Just a couple of weeks ago it looked unlikely. But the decision by the big lenders to increase their mortgage rates and continued low inflation has prompted some to predict that the RBA will step in and take the pressure off borrowers. | Just a couple of weeks ago it looked unlikely. But the decision by the big lenders to increase their mortgage rates and continued low inflation has prompted some to predict that the RBA will step in and take the pressure off borrowers. |
| (That assumes of course that the banks would react to any RBA cut by in turn reducing the rates they’ve only just increased. But we’re maybe getting ahead of ourselves here.) | (That assumes of course that the banks would react to any RBA cut by in turn reducing the rates they’ve only just increased. But we’re maybe getting ahead of ourselves here.) |
| Greg Jericho will be along shortly to take you through the main points in the buildup and I’ll keep an eye on the markets and the betting as we go. | Greg Jericho will be along shortly to take you through the main points in the buildup and I’ll keep an eye on the markets and the betting as we go. |
| Updated at 2.20am GMT | Updated at 2.20am GMT |