So OCR cuts now a bit stupid?
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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 ...
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 ...
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.
just as we thought no increase in ocr and the dollar has sky rockted