RBNZ Monetary Policy Statement Part 1 of 3

http://www.interest.co.nzDr Bollard is using consensus forecasts that oil prices will drop back below US$100 a barrel and the bank's own forecasts that slowing consumption spending and a weak labour market will drag non-tradeables inflation (ie domestic inflation not directly influenced by overseas prices) down from almost 4% to under 3% by September next year. The chart below shows non-tradeables inflation has been above 3% for six years and all through Dr Bollard's term as governor.Dr Bollard said the sharp slowdown and the likely depressing effects on inflation had given him enough confidence to start talking about a rate cut later this year. The New Zealand dollar duly fell more than 1 US cent and both wholesale and retail interest rates were cut by around 20 to 30 basis points. The "dovish" tone of his comments surprised the markets.His decision to flag a rate cut later in 2008 is a big call. To decide to signal a rate cut before any tangible signs of a slowing of inflationary pressures takes some confidence in your forecasting ability.

Channel: News & Politics
Uploaded: December 31, 1969 at 11:59 pm
Author: ofInterestNZ

Length: 07:38
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