THE DISTILLERY: Interest rate yips?

A big week this week for central banks; they meet in Australia, Japan, Europe and the UK. One may lift rates, three won't, one might decide to spend billions more on top of a multi-billion dollar stimulus package from the national government, two others will talk and discuss, but not move. Can anyone guess their identities? Australia is not a sitter, the Reserve Bank could be a doer, as it is still tipped to boost rates, although there are some late wavers who are no longer as certain as they were this time last week.

But there are still the true believers among the usual suspects. The Australian rounded up a few this morning: "Mounting evidence of accelerating growth among major Asian trading partners is shortening the odds of a rate rise tomorrow. JPMorgan economists led by Stephen Walters added their voices over the weekend to predictions that the Reserve Bank would jack up official rates by 25 basis points when it meets tomorrow. HSBC's chief economist, Paul Bloxham, said that if official interest rates did not rise tomorrow, the RBA was likely to act before the end of the year."

Fairfax's Malcolm Maiden wrote at the weekend: "The short-term fate of the dollar's push towards parity with the US dollar will probably be decided next week, as central banks around the world signal whether the ''carry trade'' that has been pushing it higher has become even more compelling. The Australian dollar is poised so because the European Central Bank and the Bank of England (Thursday night) and the Bank of Japan (Monday) are also meeting next week to consider rates. Their economies are so weak that rate rises are out of the question, as they are in the US – the Federal Reserve left its key interest rate unchanged at between 0 and 0.25 per cent on September 21. Australia is a foreign currency magnet, and next week its powers of attraction may well increase."

News Ltd's Terry McCrann says it would be: "shocking and even a tad disturbing if the Reserve Bank did not lift its official interest rate on Tuesday. Indeed the RBA all but 'announced' the rate rise late yesterday afternoon when it posted its index of commodity prices. That's our commodity prices, not commodities in general. The index went up 1.5 per cent in SDR terms in September after rising 3.6 per cent in August, to a new record high. Indeed, the index has risen by 52 per cent in SDR terms over the year. That's otherwise known as a commodity boom. Much of this rise was due to increases in iron ore, coking coal and thermal coal export prices. That's otherwise known as a customised boom made in China just for us. More pointedly, the index is now actually higher than the peak it reached in 2008. Back then, the RBA's cash rate was at 7.25 per cent. Now it's just 4.5 per cent."

Fellow News Ltd jotter, David Uren was not a fellow traveller. He says the economy is not ready: "The future looks great apart from clouds over the North Atlantic, but the economy looks too soft to warrant a return to rising rates. The business surveys are all pointing to a September quarter slowdown extending across manufacturing, services and construction sectors. Credit growth has almost come to a standstill, while consumer spending remains weak. The picture is not uniform – it rarely is – with jobs growth marking the clearest positive trend. The economy has been generating jobs at a rate of around 30,000 a month since September last year and continued that average in the latest three months." By the time the economy is ready for a rate rise, it's too late.

But the Australian Financial Review says this morning "The Reserve Bank of Australia may launch a pre-emptive strike against inflation tomorrow, with policy makers expected to raise interest rates for the first time since May."

And the news website has already got the Mixmaster out and is warning of a "bleak Christmas" if rates rise: "Home loan customers and retailers face a bleak Christmas as the Reserve Bank prepares to pull the trigger on higher interest rates as early as tomorrow. Consumers are also being warned they will be slapped with credit-card rate rises as banks take advantage of extra debt racked up over the festive season. The Australian Retailers Association said a Reserve Bank rate rise would be disastrous for shops hit by reduced trade because of political uncertainty over the Federal Government." And The Sydney Daily Telegraph had some culprits lined up in advance: "The big four banks will use a series of super-sized interest rate rises to chase record annual profits equal to $1000 for every man, woman and child in Australia. Key banking analysts said the banks had run out of ways to boost their already massive profits other than by lifting rates above and beyond the official increase. And the raid on the hip pockets of struggling homeowners is likely to start as soon as this week."

The coming week also sees some important data released – jobs figures and retail sales in Australia, plus car sales, growth in Europe and America's September unemployment figures. The AFR says "The US economy probably struggled to create any net new jobs last month, according to economists, adding to expectations that the US Federal Reserve will embark on another round of money printing to bolster the economy and ward off the threat of deflation."

Fairfax's Ian Verrender says beware the Ides of October: "It is the month that has marked just about every market meltdown of the past century. There was the Great Crash of 1929, the Even Greater Crash of 1987 and the Asian financial crisis of 1997. All took place in October. In 2007 October marked the peak of the greatest stockmarket boom in history, and after some wobbles during that fateful month, traders finally hit the sell button en masse on the very last day. Then there was October 2008. After one of the worst years on record that particular month induced a global panic, the likes of which had never been seen before, following the collapse of the US investment bank Lehman Brothers in September."

The Australian's John Durie returned to Nufarm and chairman Don McGauchie on the weekend: "Donald McGauchie's corporate reputation rests on his ability to shake some reality into Nufarm, starting with some high profile departures. This should come easy to McGauchie, a self-proclaimed fighter for justice, but then he was on the Nufarm board for seven years before his elevation to the chair in July. Given his tenure he is arguably part of the problem, but by all reports is pushing hard for change with so far no obvious outward signs of success. Now that the bank deal has given him a couple of months of breathing space, the time is ripe for some action."

And Fairfax Economic Editor Ross Gittins has another life planned for himself, if possible. He's not much impressed by his fellow economists: "In my next life I'm going to be a psychologist. If I can make myself work harder at uni than I did last time, I'll become an academic and start a new branch of the discipline called PPP - public policy psychology. Economists tell themselves government regulation fails because of the corruptibility of politicians and public servants. It never occurs to them the root cause may be their own shaky grasp on human motivation. Economics is in an imperialist phase where economists seek to dominate the bureaucratic advice going to governments." He might add some journalists, political and economic, to those seeking to dominate advice going to government, as we have seen this morning.