Is there anything more Australian than having a punt on whether the Reserve Bank will change interest rates on Melbourne Cup Day?
As race goers gather at Flemington on the first Tuesday of every November, the Reserve's board also gathers around the table at the boardroom at its Martin Place headquarters in Sydney.
The board meets on the first Tuesday of every month, except January.
As the starting gun fires on the preliminary races, a series of Reserve Bank officials brief board members on the latest developments in the world and local economy.
At 2.30pm, the board announces its decision to the market. And at 3pm, horses bolt out of the gates for Race 7 of the Melbourne Cup.
An awaiting nation holds their breath for both events. Front page newspaper editors scramble for their best race-day interest-rate metaphors. It's rate cut by a nose!
You're not imagining it: Melbourne Cup Day rate changes have become increasingly common in recent years. Why?
The lives of financial journalists changed forever in February 2008 when the Reserve changed from announcing its monthly decisions to 2.30 pm on the day of the decision, rather than at 9.30am on the following morning as was previous practice. For logistical reasons, it is no longer necessary to wait, and the closer the announcement is to the actual decision, the less potential there is for information from any loose-lipped board members to hit the financial markets and create opportunity for insider trading.
But rate decisions have also fallen into sync with two other important events on the economic calendar.
First, the Bureau of Statistics releases its quarterly reading on consumer price inflation on the last Wednesday of the month after it has finished collecting figures for the quarter in question. Importantly, the September quarter figures are always released on the last Wednesday of October – just in time for Cup Day.
Being an inflation-targeting central bank, the Reserve is always keen to know if inflation is on the trajectory it expects. If it's not, it wants to act, and act quickly.
And if it does, this quarterly inflation data cycle syncs nicely with another regular event: the release of the Reserve's quarterly Statement on Monetary Policy. The SOMP, as it is affectionately known, is released every three months on the first Friday of the months of November, February, May and August.
So, if the Reserve feels it needs to alter interest rates unexpectedly, it knows it can always explain itself fully on the Friday. And it's human nature for officials to want to write their SOMP knowing that interest rates are where they need to be to keep inflation on target.
This economic data cycle now means that interest rate changes in November, February, May and August are now particularly "live".
Indeed, of the 12 interest rate cuts (one was a double) delivered in the most recent easing cycle, which commenced on Melbourne Cup Day in 2011, two thirds have been delivered on "live" months, rather than the one third you would expect if they were evenly distributed. And all of the past six decisions have fallen into this schedule.
It's true the Reserve hasn't changed interest rates on Cup Day since 2011. But before that, it ruined the chances of financial journalists slipping off early to the pub on Cup Day in 2010, 2009, 2008, 2007, 2006, 2003, 1999, 1996 and 1991. If we weren't writing up the actual decision, prior to 2008 we were filing previews of what would likely be announced the following morning.
Markets expect this year's Melbourne Cup Day to be a quiet affair, with little prospect of a rate change. We'll know more, as always, when we get inflation figures later this month.
Seasoned RBA watchers know you must always keep an eye out for an outside chance on Cup Day.
