Reserve Bank boss Dr Phil Lowe has a Bud Fox moment ahead on Tuesday when he and his Board decide whether to slug us another 0.5% on our home loans. After not covering himself in glory when leaving a message for the borrowers in the Aussie economy that interest rates might not rise until 2024 (which was a shocker), he needs a big game with his interest rate call.

If he overreaches and raises rates too quickly causing a recession, he’ll be pilloried as a plonker RBA boss.

This isn’t what I want for him and our economy, so I’m wishing him all the luck in the world with his interest rate decisions.

This comes as recent US economic data has some experts tipping the Fed will keep raising rates aggressively over November and December, which will be terrible for stock markets and the confidence of people invested in the market.

“The Fed won’t be slowing the pace of their rate hikes yet, with 75 basis points in November and 50 basis points more in December a virtual certainty,” said Christopher Rupkey, chief economist at FWDBONDS in New York, which was reported in the AFR today.

This makes Dr Phil’s life harder because if the Fed remains aggressive but the good doctor decides it’s time to ease up with rate rises until he gives the previous rate rises time to hit and hurt the economy, then our dollar could fall further, which adds to inflation via more expensive imports.

Remember, Dr Phil is raising interest rates to lower inflation, so you can see his bind, where he could be damned if doesn’t keep raising by 0.5% on Tuesday, but damned as a potential economy wrecker if he does!

On Tuesday, Dr Phil should be thinking about the movie Wall Street, especially with stock markets diving globally, and this from Bud Fox is very relevant for him: “Life all comes down to a few moments. This is one of them.”

I could be a tad dramatic but for a virtual public servant on a $1 million+ salary, who has had a reputation for being a very smart and nice guy, he needs a big win. And navigating us through this interest rate fight against inflation is an important moment in his life.

What Dr Phil does on Tuesday and in the next few months will be important for our fight against inflation and whether a recession shows up because of his work. A recession will take people’s jobs, put businesses into bankruptcy and KO stock prices.

This would also follow a period of collapsing house prices and a lot of borrowers in mortgage stress. The headlines wouldn’t be good for Dr Phil and the RBA.

Did I say Phil is facing an important life moment?

While most economists are expecting another 0.5%, the CBA economics team is an outlier, tipping Tuesday’s rate rise will be 0.25%.

Gareth Aird, head honcho for the economics outfit at the CBA, told the AFR that the new monthly CPI statistic released this week was promising for the fight against inflation.

If this new number is credible, the 6.8% inflation reading for the year to August is a nice sign that the RBA would have welcomed. “We stick with our call for the RBA to slow the pace of their tightening cycle at next week’s board meeting and to raise the cash rate by a ‘business as usual’ 25 basis points,” said Mr Aird.

He also explained that the Oz dollar (at 64.7 US cents this morning), has only copped a fall against the greenback. “The Australian dollar has held up on a trade-weighted index (TWI) basis and imported inflation is more closely correlated with the TWI than the $A,” he told the AFR’s Cecile Lefort.

On a weekly basis, I look at the economic data from here and overseas in my Saturday morning Switzer Report for our investment subscribers. In that newsletter, I look at what I like or dislike in the economic/market data over the week.

Because we want inflation to fall, I now might like a fall in consumer confidence, where historically I’d never say that, but these are strange times.

Over the past three weeks, I’ve seen indications that inflation could be starting to slide. Here are a few examples of good anti-inflation developments:

1. Measures of both input costs and output price inflation hit 7-month lows in September.
2. The SEEK Advertised Salary index rose by 3.8% over the year to August 2022, down from 4.1% in July. Advertised salary growth also slowed month-on-month, growing by 0.3% in August.
3. The CBA credit and debit card spending tracker shows a slowdown in spending growth.
4. The unemployment rate rose from a 48-year low of 3.4% to 3.5%, the first increase in 10 months.
5. The Australian Bureau of Statistics (ABS) reported that the mean price of residential dwellings fell $18,900 to $921,500 in the June quarter – the first fall in two years.
6. The Australian Industry Group (AiGroup) and Housing Industry Association (HIA) Australian Performance of Construction Index (PCI) rose by 2.6 points to 47.9 points in August, but activity contracted for a third straight month. And house building activity contracted for a fourth consecutive month to a 27-month low of 33.3 points. Readings below 50 denote a contraction in activity.

Life’s always a bit of a gamble and I hope Dr Phil goes for a big life moment and takes a punt and raises rates by 0.25% next Tuesday (possibly ahead of a pause from rate rises) to give his previous rate rises a chance to do their work, which always comes with a lag.