WEEKEND ECONOMIST: Up again

With markets and the media primed for a rate hike last month the Bank is likely to take advantage of these expectations to nudge the cash rate further towards neutral next week.

Current market expectations put the probability of a move at about 50 per cent. We believe that most meetings in 2010 will be 'live' in that there will be a genuine possibility of policy change and at least for the next few months a 50/50 prospect is entirely reasonable.

Arguments in favour of a further pause are based around concerns with the global economic outlook and some recent weakness in local economic data – notably housing finance, retail sales, and wages.

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