Kneejerk reaction to rising mortgage rates unlikely

The tightening in monetary conditions triggered by the recent rises in mortgage rates by the major banks and the strengthening in the dollar is unlikely to prompt the Reserve Bank of Australia (RBA) to cut interest rates from 2.0% at the policy meeting on Tuesday 3^rd November. Even so, we still believe that a failure of economic growth to rebound in 2016 will force the Bank to reduce rates to a new record low of 1.5% next year.