One of the most interesting things about the Reserve Bank's decision to leave Australian official interest rates on hold lay in the way it wrong-footed so many commentators as well as market participants. Pretty much everybody, me included, thought a rise was likely. In fact, so likely that the Australian on-line bookmaker Centrebet had apparently refused to take bets on this month's move for the first time since it started covering Reserve Bank decisions because it said the odds were so skewed towards a rise.
Thinking about it, I'm surprised that we were all so surprised. Here Michael Pascoe had a reflective piece in the Sydney Morning Herald that is worth reading.
By its nature, the RBA operates with a longer term perspective than most commentators or market operators. It has too because of the time lags and uncertainty inevitably attached monetary policy.
The decision by leading Australian banks to raise interest rates by more than the last official rise increased the economic impact of the rate shift. Little has changed in economic terms since the last rise. So a rate hold isn't all that surprising.
I suspect that there may be another issue as well.
The Reserve Bank has been quite clever in managing expectations, something that's important in policy where expectations can be more important than actions. It's dramatic decision to first increase official rates had global impact on economic confidence. Australian opinion certainly swung towards greater confidence in the economic outlook.
Keeping interest rates on hold this time has the useful effect of making market participants a little more cautious when it comes to pre-judging Bank decisions.