The expert I listened to at a presentation 2 weeks ago seemed to think the more rates are cut the more people will be setting aside for savings thus less investment and consumer spending and less inflation and growth.
So OCR cuts now a bit stupid?
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
Not that easy. I guess what the RBNZ is supposed to do is to manage inflation and economic growth and unemployment rate in an internationally deeply intermingled system using basically one single lever.
If the NZ economy would be a closed system, than a further drop of the interest rate would be plain stupid.
However - if the others drop their interest rates for whatever reasons and the RBNZ does not follow, than this would mean everybody moving their money to NZ (to get our higher interest rates), driving that way the NZ$ up and killing our export industry.
I guess its a case of choosing which death to die ...
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"Prediction is very difficult, especially about the future" (Niels Bohr)
This was only one so called "expert" (used to work for the ANZ) but what he did say made some sense. He seemed to think traditional way of thinking about it was not working at the moment.
However - if the others drop their interest rates for whatever reasons and the RBNZ does not follow, than this would mean everybody moving their money to NZ (to get our higher interest rates), driving that way the NZ$ up and killing our export industry.
I guess its a case of choosing which death to die ...
It is interesting, though, that the last big drop in the OCR was way later than other countries but we weren't really suffering the adverse effects you suggest.
Not quite as closely coupled as you suggest.
It is interesting, though, that the last big drop in the OCR was way later than other countries but we weren't really suffering the adverse effects you suggest.
Not quite as closely coupled as you suggest.
How do you measure that?
Gladly the markets are not just driven by one-eyed day traders. Have a look though at the long term trend of the NZD against other major currencies.
When we moved 25 yeas ago to NZ the NZD was slightly below 1 Deutsch Mark - moving (changed into Euro) roughly between 0.44 to 0.48 Euro cent. Look where it is now ...
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"Prediction is very difficult, especially about the future" (Niels Bohr)
after the inflation reading the other day , the dollar and swap rates reversed course sharply implying the markets think a rate cut is coming. if they dont cut i expect an oversized reaction up in the dollar.
Gladly the markets are not just driven by one-eyed day traders. Have a look though at the long term trend of the NZD against other major currencies.
When we moved 25 yeas ago to NZ the NZD was slightly below 1 Deutsch Mark - moving (changed into Euro) roughly between 0.44 to 0.48 Euro cent. Look where it is now ...
Your post implied a short time span than 25 years.
Aus dropped their OCR (equivalent) some time before ours was dropped and our export industry didn't die (by way of example).
Your post implied a short time span than 25 years.
Aus dropped their OCR (equivalent) some time before ours was dropped and our export industry didn't die (by way of example).
Are you for real?
Every sensible export business will hedge their orders - i.e. short term day to day fluctuations will not be an issue.
Fluctuations longer than the length of the order book however will.
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"Prediction is very difficult, especially about the future" (Niels Bohr)
Originally Posted by blackcap
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