Rates on hold beyond Christmas

Borrowers can more confidently look forward to the run up to Christmas without the prospect of an interest rate rise after the latest set of economic numbers. The Reserve Bank board will almost certainly decide to keep rates steady when it meets on Cup Day this Tuesday. And it may well do the same in December, too.

Further rate rises in coming months can't be ruled out but the latest inflation and home borrowing figures suggest there is no pressing need to hike rates yet emerging.

Housing credit rose 1 per cent during September as measured by the RBA, after a 0.9 per cent rise in August. These are the lowest consecutive figures since early 2001 and will give the RBA some satisfaction as it looks for evidence of home lending coming back to more sustainable levels. Personal credit has put in a couple of robust months, however, with 1.1 per cent September growth following 1.3 per cent in August. The trend still seems to be downward though with annual growth falling to from 13.6 to 12.8 per cent.

The RBA board will also have liked the look of the CPI figures this week, showing inflation still well in check at an annual rate of 2.3 per cent, comfortably within the 2-3 per cent target band. It was the Producer Price Index that caused worry this week with evidence that inflationary pressures may have started to build in wholesale prices during the September quarter, for both domestic and imported goods. If persisting, the danger is this flows through to retail prices. Oil will be one reason for the rise, and the Aussie dollar's fall during the three months another. But this has now reversed as the greenback slumps.

Next week's release of the latest monthly retail trade figures will be watched for an expected turnaround after a surprisingly flat couple of months. Any ongoing softness in consumer spending will fuel fears of economic slowdown.