The thinking behind the RBA’s ‘hawkish pause’ in not inflicting another rate hike

The RBA has kept interest rates on hold, but  that doesn't mean Governor Philip Lowe and his board will keep it that way.

The RBA has kept interest rates on hold, but that doesn't mean Governor Philip Lowe and his board will keep it that way. Photo: AAP

Commentators will run a fine-tooth comb through what Philip Lowe has to say next following the Reserve Bank’s decision to keep interest rates on hold this month.

The central bank has been hiking rates to rein in inflation, but in July kept them steady at 4.1 per cent at its July 4 meeting..

The call by the RBA board had economists divided, with many expecting to see another 25 basis point hike.

The governor’s statement that accompanied the decision had some labelling it a “hawkish pause”.

While Mr Lowe’s comments included a reference to the possibility of tightening, it also stripped out most of the commentary about upside inflation risks.

Mr Lowe’s speech at the ESA National Conference in Brisbane on Wednesday will hopefully shed some light on the likelihood of more interest rate pain but the title of the talk suggests the focus will be on the review into the bank.

The independent review was handed down in April and called for a rejigged governance structure, namely the creation of two separate boards – one responsible for governance and the other for monetary policy, which sets interest rates.

Bankers set for a grilling

Leaders from Australia’s big four banks will also make public appearances this week at a parliamentary committee.

ANZ and NAB are expected to front  on Wednesday and the Commonwealth Bank and Westpac on Thursday.

They will explain how they are balancing the interests of borrowers, depositors, shareholders and the wider community.

Other items of interest this week include Westpac’s consumer confidence index and NAB’s business survey, both expected on Tuesday.

The Australian Bureau of Statistics will release overseas arrivals and departures data on Wednesday.

Investors on Wall Street are meanwhile digesting a US jobs report showing weaker-than-expected growth and awaiting more data and corporate earnings expected this week.

The Dow Jones Industrial Average fell 187.38 points, or 0.55 per cent, to 33,734.88 on Friday, the S&P 500 lost 12.64 points, or 0.29 per cent, to 4,398.95 and the Nasdaq Composite dropped 18.33 points, or 0.13 per cent, to 13,660.72.

Australian share futures moved up 25 points, or 0.35 per cent, to 13738.

The benchmark S&P/ASX200 index finished down 121.1 points, or 1.69 per cent on Friday, at 7,042.3, while the broader All Ordinaries fell 120.9 points, or 1.64 per cent, to 7,244.1.


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