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Markets closely watching Reserve Bank on 'Super Tuesday'


RBA Governor Philip Lowe with his 'half full' mug in August

The Reserve Bank is holding its first meeting for 2022, with the expectation it will end its bond buying program and bring forward the timing of a rate hike.


It's been described as "Super Tuesday" by one economist with the Reserve Bank of Australia holding its first board meeting of the year at the same time a bevy of economic figures are released.


Rising inflation and a sharp drop in the unemployment rate is expected to see the RBA rethinking its guidance on the interest rate outlook.


Until late last year, the RBA was indicating that a rise in the cash rate would not occur until 2024, before shifting its stance to possibly 2023.


RBA governor Philip Lowe had repeatedly ruled out the likelihood of a move in 2022.


But that was before the December unemployment rate dropped to 4.2 per cent, a year earlier than the RBA had been predicting, while inflation is also running well ahead of its expectations.


Financial markets are pricing in the risk of a rise in the cash rate from a record low 0.1 per cent by mid-year, while economists appear to be gravitating to the August board meeting.


The RBA will have plenty of opportunity to spell out the likely path of interest rates in the coming week, while economists expect it will end its bond-buying program at Tuesday's meeting.


The latest RBA figures released on Monday showed outstanding loans jumped by 0.8 per cent in December to be up 7.2 per cent on a year ago – the strongest annual growth rate in 13 years – driven by a lift in housing borrowing.


Aside from his post-meeting statement on Tuesday, Dr Lowe will also address the National Press Club in Sydney on Wednesday, while the RBA will release its quarterly statement on monetary policy and latest forecasts on Friday.


Also on Tuesday the weekly ANZ-Roy Morgan consumer confidence index is released, which will take into account the impact of the interest rate hike speculation.


The latest CoreLogic home value index for January is expected to show a further slowdown in house price growth, after posting the fastest annual growth since 1989 at 21 per cent in 2021.


Demand for home loans is also expected to have slowed in December in figures due from the Australian Bureau of Statistics on Tuesday, with economists' forecasts pointing to a 0.8 per cent decline.


Wrapping up a busy day, retail spending for December is expected to have declined two per cent following two extremely strong months as COVID-19 lockdowns were eased.