Originally Posted by
Fiordland Moose
IMO the terminal rate is the easier part of the puzzle and at this point I don't think its overly important where it stops +/- 50bps... the harder part is how long will rates persist, will it be a plateau or will it be undulating after the peak. The labour market is still incredibly tight so that'll be the bellwether for me. Recent generations of the population, lawmakers, investors and even some of the RBNZ staff don't have a whole lot of experience with battling inflation. The whole expectation has been until lately that a couple rate hikes would fix the job and it'd come right down which has proven incredibly naïve and inconsistent with history. there are many decision makers responsible for fiscal / monetary policy that will declare mission accomplished when CPI hits (say) 5-6% and start bringing out the fiscal stimulus and dropping interest rates which if the labour market is still tight could just see inflation rebound and we have a years upon years of high rates. a whole lot of unknowns. Fed staff are people who are as imperfect as the rest of us and what ought to happen rarely nicely fits with what ought to happen with the benefit of hindsight