Opinion: Rate forecast accountability

It is a well known fact that in New Zealand bank economists and the RBNZ economists are never too keen to have their historical forecasts measured against actual outcomes, so that the accuracy of their forecasting can be clearly observed. They continually provide new forecasts and hope that no-one remembers their old forecasts! A number of the banks are now forecasting 90-day interest rates to go below 5.00% on this down cycle. Borrowers and investors should be very wary about placing too much reliance on such extreme forecasts. I had some research conducted on the interest rate forecasts made 12 months ago by the banks, the RBNZ and ourselves (Asia-Pacific Risk Management). In October 2007, Westpac's interest rate forecasts were for the whole yield curve to be higher in 12 month's time (increase to 8.50% to 9.00%) The chart summarises the results of the forecasts made 12 moths ago against where interest rates are today (October 31, 2008)    --------------- *Roger J Kerr runs Asia Pacific Risk Management. He specialises in fixed interest securities and is a commentator on economics and markets. More commentary and useful information on fixed interest investing can be found at rogeradvice.com