What Will Be The Outcome on Cup Day?

It’s the Race That Stops The Nation. But half-an-hour before this year’s Melbourne Cup there is an event that will have a bigger impact on Australians.

At 2.30 on Tuesday the Board of the Reserve Bank (RBA) meets to decide on interest rates. This time, the decision as to whether to drop rates, or keep them on hold, is a line-ball decision.

One of the key factors influencing the RBA is the inflation rate. Earlier this week, the Australian Bureau of Statistics released inflation figures that were slightly higher than expected (+0.7 per cent for the quarter). However, the RBA’s preferred target – core inflation – was much weaker at 0.35 per cent.

Based solely on the inflation figures, there is a strong argument for reducing rate on Tuesday.

However, there is still a lot of life in the property market. This week, Domain recorded a 9.1 per cent house price growth figure for Melbourne and 2.17 per cent for Sydney in the last quarter.

Despite expert predictions, in many locations, the property market is still hot.

It is neck-and-neck on Tuesday. But I am betting that rates will remain on hold.