DIARY: It's Interest Rates

There's the Melbourne Cup and there's the Reserve Bank Board meeting in Sydney.

Wednesday many of us will awaken with a hangover, or feeling a bit seedy, light of pocket, and at 9.30 pm, that feeling will worsen when the RBA reveals its interest rate decision.

The election and business will all be changed by the announcement.

Friday's very solid jobs figures from the US when around 166,000 jobs were created (but the unemployment rate remained at 4.7%) will have made the bank's decision much easier.

Despite the gathering concerns about the health of major banks with rumours, again denied that Barclays had borrowing from the Bank of England, the RBA won't look at these overseas events.

It would have to take a shattering crisis tonight in the US and Europe of such magnitude (a major bank going broke) for the bank to stay its hand.

And if a major bank went broke, then no one will be able to save the markets from a crunch, not even China.

The AMP's chief economist, Dr Shane Oliver, says "Ideally it would be preferable for interest rates to be left on hold during the election campaign lest they become politicised in a way that may ultimately threaten the independence of the Reserve Bank and for no good reason as a month's delay in changing rates will have negligible economic impact.

'The ongoing uncertainty about the global growth outlook, the de facto tightening in monetary policy that has flowed from the turmoil in credit markets and the strong Australian dollar are other reasons for the Bank to hold off on rising interest rates.

"However, a worse than expected rise in the Reserve Bank's preferred measures of underlying inflation in the September quarter and a run of strong economic data combined with Governor Steven's comments in August to the effect that the Bank would not let an election campaign prevent it from doing whatever is necessary have made it likely that interest rates will be increased again on Wednesday morning."

This will take the cash rate from 6.5% to 6.75%.

He said "While the money market is already factoring in another rate hike by mid next year, our assessment is that this won't be necessary given the slowing US economy, the impact of the strong $A in dampening inflation and growth and the increasing number of Australian's in mortgage stress. So we would see 6.75% as being the peak".

That's different to Westpac who see two, possibly three, rate rises on the offing: with the possibility the two could come in this week and next month.

The rate decision will come along with figures from the ANZ on job ads, housing finance, house prices and employment data from the Australian Bureau of Statistics.

The US services sector survey will be released along with the latest figures for trade, import prices and consumer sentiment. But all eyes will be on the price performance of major banks.

To that end don't expect rate moves from the European Central Bank and the Bank of England this week.

Major corporate moves and announcements will include the Telstra and Commonwealth Bank AGMs on Wednesday.

Telstra could see a major revolt by big shareholders against the pay packets of senior management. Telstra will ignore that and point to last week's earnings and performance upgrade, which it says is two years ahead of schedule.

TLS' share price rose 8c on Friday to $4.79 as a number of brokers upgraded their forecasts in the wake of the Thursday briefing.

Two years of above average earnings outcomes and the promise of more to come will eventually overcome any shareholder opposition: but if Telstra stumbles, watch the sharks attack.

CSR reports its 2008 interim and it will make average reading with problems in sugar and in building products leading to a less than optimistic outlook.

News Corp will produce its first quarter result early Thursday morning, Australian time.

Retailing will be in the spotlight with the Coles Group shareholders meeting to discuss and vote on the Wesfarmers merger proposal. David Jones produces first quarterly sales figures and the NAB is the last of the major banks to report its 2008 profit this Friday.

Apart from the Telstra and CBA AGMs, quite a few others will be held. West Australian Newspapers on Friday will be watched to see if Seven's Kerry Stokes attends to oversee his 17.2% owned associate..

MONDAY:

Australian Industry Group/Comm. Bank performance of services index for October; the TD Securities/Melbourne Institute Inflation gauge for October; the ANZ Jobs ads figures for October; NIB Holdings expected to list on the ASX; AGMs from Babcock and Brown Power, Staging Connections.

TUESDAY:

Melbourne Cup; Reserve Bank board meets in Sydney; AGMs include Healthlinx and Deltana Energy.

WEDNESDAY :

RBA rate decision at 9.30 am; CSR half year results; AIG/Housing Industry Association performance of construction index for October; Australian Bureau of Statistics figures for housing finance and house price index for the September quarter; Telstra AGM and CBA AGM; Coles shareholders meet on Wesfarmers offer.

THURSDAY:

October labour force figures from the ABS; News Corp first quarter profit and David Jones first quarter sales; AGMs from Leighton Holdings, Resmed, AGL Energy, Servcorp, Seek, Devine and Transpacific Industries.

FRIDAY:

NAB 2007 annual profit; AGMS from Keycorp, WAN, Hills Industries, Macmahon Holdings and Coates Hire.

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