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Interest rates to rise in November? Place your bets!

As the Melbourne Cup fast approaches, the big question many punters are asking has less to do with horses and more to do with interest rates. It just so happens that the race that stops a nation is run on the first Tuesday in November, which coincides with the Reserve Bank’s monthly monetary policy meeting (held on the first Tuesday of each month).

If recent history is anything to go by, a sure bet on the 2nd November would be that the RBA will move on interest rates, as has happened for the last five consecutive cup days.

In an article published in the Sydney Morning Herald, AAP economist Garry Shilson-Josling, says the RBA is twice as likely to move on interest rates in the months of February, May, August and November than in the other seven months of the year.

“The reason for this is that those are the meetings falling immediately after the release of key inflation figures late in previous months,” he explains.

Given that the RBA’s monetary policy decisions are based on self imposed inflation targets dating back to 1993, “it is much more likely to adjust interest rates after it has had a chance to check the inflation numbers against its forecasts,” says Shilson-Josling.

Odds on the RBA making their move in November might be favorable if punters were to go by outcomes in recent years, but overall statistics show that since the RBA began announcing its rate decisions in 1990, there have only been 8 out of a possible 59 moves for the month of November; five increases and three cuts to the official cash rate.

However Shilson-Josling says, “The odds have moved against the punters in recent years, with only one cut – in 2008, amid the global financial crisis – and three increases in the past four Novembers.

“If there is a move this November, it will almost certainly be an increase.”

And what does the futures market say about the likelihood of an upward move on November 2nd? In their opinion, the odds of a rate rise are 6-4 (or 40%) – not too bad for punters wanting that little bit of extra cash to put on their favourite thoroughbred rather than their monthly mortgage repayments.



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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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