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Reserve BankThe Reserve Bank of Australia (RBA) now has just about all the data it will get ahead of its board’s monetary policy meeting next week.

And the way the figures stack up, the chance of an interest rate rise on Tuesday are exceedingly remote.

The odds still favour a rate rise eventually, but the recent run of data has pushed the move out well into next year.

The futures market puts the point when the cash rate is more likely to make the jump to 5.0 per cent from its current 4.75 per cent at around August next year, and has it staying at 5.0 per cent until around the middle of 2012.

This is good reason to expect the RBA to hold its fire.

The November RBA meeting was preceded by inflation figures that came in toward the low end of the RBA’s stated expectations.

This led to a decision that, like the no-change decision in October, was “finely balanced”, something RBA governor Glenn Stevens confirmed in testimony to parliament on Monday.

There has been little since then to make the RBA any more firmly committed to raising interest rates, and plenty to bolster the case for staying on the fence.

The labour force data released the week after the rate rise in early November surprised forecasters with a blip up in unemployment to 5.4 per cent, a six-month high, from 5.1 per cent.

A blip it may have been, but it confirmed the trend in unemployment is flat, at best, and not downward as had appeared likely given the apparent strength of demand for labour and anecdotal evidence of skills shortages.

And this week we had the national accounts, confirming the indications of the rash of data releases leading up to it, that gross domestic product (GDP) growth in the September quarter would be slow.

And slow it was – a real-terms rise of 0.2 per cent, compared with a 1.1 per cent surge the quarter before.

That was partly due to likely one-offs such as a faster run-down in inventories and a dip in the volatile exports category.

But there was no getting around the message from the data that the economy wasn’t speeding along quite as quickly as supposed.

A surprise fall in retail trade in October, revealed by the Australian Bureau of Statistics (ABS) on Thursday, continued the theme.

Widespread heavy rain across the country most likely dampened the enthusiasm of shoppers, and the soaring exchange rate probably reduced the dollar value of spending.

But a 1.1 per cent fall in retail turnover is still a setback to retailers – and the rain continued through November.

Sooner or later the economy will pick up.

But the RBA clearly has plenty of time to ponder its next move, confident that the coming mining investment boom will not hit an economy already at full stretch.

Story source: www.ninemsn.com.au

Tags: banks, finance, interest rates, money, mortgage, news, property

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