The annual rate of inflation dropped to 6% in the June quarter as high interest rates begin to bite into household budgets.
Statistics NZ’s consumer price index increased just 1.1% between March and June, the smallest rise since the first quarter of 2021.
The annual rate of inflation has dropped from 6.7% as of March, and 7.2% as of December 2022. It peaked at 7.3% in June 2022.
“Prices are still increasing at rates not seen since the 1990s but are rising at a lower rate than the last few quarters,” consumer prices manager Nicola Growden said.
This was what the Reserve Bank of New Zealand had forecast and was baked into last week’s decision to hold the Official Cash Rate (OCR) at 5.50% after a dozen consecutive hikes.
Economists and commentators have said this data release would test whether that decision was the right one and whether rates were high enough to ‘do the trick’.
Lower petrol prices helped to drive headline inflation lower. Global oil prices spiked last year after Russia invaded Ukraine but they have since fallen due to weak demand.
Petrol prices at the pump have fallen around 15% over the past year, but those savings have been offset by much higher food prices that have increased more than 12%.
Disastrous weather in the North Island has been pushing up the price of fresh produce, up 21% from a year ago, but the cost of groceries and restaurant meals have also increased.
This was the largest annual increase since 1987 when goods and services tax was first introduced.
“With food prices up 12.3% annually, consumers may be buying cheaper alternatives to keep their food bill lower,” Growden said.
Stats NZ tracks a fixed basket of goods and consumers personal rate of inflation might be higher or lower than the average they report.
The cost of food is extremely important to consumers, but it only makes up less than a fifth of the consumers price index.
Housing is the largest category in the index and was the second biggest contributor to headline inflation. Rents were up 4.2% and construction costs were up 7.8% on an annual basis.
The price of building a new home has increased by more than a third over the past three years, despite house prices having fallen almost 16% from their peak.
Recreation and culture were the next largest contributor, driven by rising prices of pets products and overseas accommodation.
While offshore hotel rooms were getting more expensive, flying there was getting cheaper. International airfares fell 11.9% and are beginning to trend back toward pre-Covid prices.
A chunk of the decline in headline inflation was due to Ukraine-related price shocks dropping out of the annual calculation, such as petrol prices which had their largest annual fall since September 2009.
While the central bank will be pleased to see headline inflation retreat, domestic price increases have proved to be more stubborn.
Non-tradable inflation drops, but not much
Annual non-tradable inflation was still running at a record of 6.8% in the March quarter, despite headline inflation having peaked at 7.3% nine months earlier.
It finally fell in the June quarter—to an annual 6.6%—suggesting domestic inflation has also peaked. The biggest pressures in non-tradable inflation was construction, rent, and ready-to-eat food.
Stats NZ said non-tradable inflation measures goods and services that do not face foreign competition and is an indicator of demand and supply in the domestic economy.
The RBNZ said in its monetary policy review last week that it expected core inflation to decline as capacity constraints eased, although it didn’t comment on when that might happen.
Inflation has been falling globally. The United States’ annual rate dropped to 3% in May, which is the slowest rate since the start of 2021 and core inflation fell to 4.8%.
Australia’s annual rate fell to 5.6% in May, having peaked above 8% late last year. European inflation was at 7.1% in the June quarter and the OECD average was 6.5%.
New Zealand’s economy is most comparable to Australia, as European countries have been more exposed to energy price shocks and the United States is the largest economy on Earth.
Overall, the June data should support the Reserve Bank’s view that holding the OCR at its current level will be enough to bring headline and underlying inflation under control.
That said, next quarter will contain some extra inflation pressure as Government fuel tax cuts and public transport subsidies ended on July 1. Council rate increases will also be high.
More costs and fallouts from the cyclone and flooding are also working their way through the economy and could show up next quarter.
Prior to the data release, financial markets and some economists were still predicting the Reserve Bank would increase the OCR another 25 basis points before the end of the year.
'A hot core of inflation'
Brad Olsen, chief executive of Infometrics, said the result was what the Reserve Bank had expected but it may be concerned about sticky domestic inflation.
Household essentials were were still “intensely hot”, with food, energy and rents all putting pressure on people’s budgets.
“There is still a hot core of inflation. The question now will be where the new normal will land, because if it is above 4% then there will be more work to do,” he said.
206 Comments
Cracked a rim on my little eco hatchback hitting a pothole (maybe Simeon Brown dug it deliberately to score another enthusiastic pothole-slush-fund voter).
Normally I bike, or take the little car which is so frugal on petrol I haven't paid attention to petrol costs in a long time. I fill it, and the 35L tank seems to last the best part of a couple of months.
While that's in for repair, I've been driving my old V8 4x4 that I keep on the fleet for skiing, towing, and potential apocalyptic scenarios.
Let's just say I am suddenly acutely aware of petrol costs again.
Long term average is fairly meaningless when the neutral rate has been steadily dropping over that period. Current rates are *equivalent to the highs seen in the 80s (well, maybe not quite, but not far off - apples and oranges).
EDIT: Equivalent in contractionary effect - clearly 6% is a different number than 20%, that's not my point.
A neutral real interest rate provides a broad indication of the level of real interest rates where monetary policy is neither contractionary nor expansionary. Link
The "neutral interest rate" is one where we get the OCR back inside the target band. If the current OCR is sufficient to get us there over time it could be considered the neutral rate. Only if we look like we might drop below the band could the neutral rate be lower than what it is now.
We just stop the rate rises when get to 3% we don't get cuts until it gets below 1% or we pretend it might so the can justify the stimulus.
The "neutral interest rate" is one where we get the OCR back inside the target band.
That's incorrect. When inflation is above the target band, generally speaking, contractionary policy is required - i.e. an OCR that is above the neutral rate. It's not possible to know with absolute certainty what the neutral rate is, but we can get a good idea by studying the relationship between OCR and inflation over time. Clearly, we are now very deep into contractionary territory (look at the rate of change of inflation, i.e. the second derivative of CPI), which means the current effective rate is well above neutral. If you account lag effects (basically, the fact that many home loans are still to roll off lower rates), that gives you an idea of where neutral is relative to the current OCR. That should explain why a pivot in rates is closer than the RBNZ have suggested, which they quietly know to be the case, but dare not say lest they shoot themselves in the foot.
How would just a "second derivative" tell you if something is expanding (or contracting)? It would at best suggest something has a relative (but not absolute) effect on it.
We are still "expanding" CPI faster than we define as flat. You could argue it's a not perfect measure of monetary expansion (or the policies effect on it), but its the one we seem use.
You have piled a rather large number of incoherent assertions together here, some of them true but don't necessary prove the next thing.
This is the better figure, so we are almost back to range now. RBNZ just needs to hold now, still lots of people to come off low rates onto higher, so spending will keep dropping for the next 6 months or so at least.
Increases now would be asking for trouble, already they may have swung too far given the delay between rate changes and effects.
Lower petrol prices helped to drive headline inflation lower
Transport costs in NZ are already higher in Q3-23 than they were in the same quarter last year, owing to the subsidies on petrol and RUC being phased out on 1 Jul. Global crude prices have also jumped 13% since 1 July.
So, CPI won't be coming down fast for the remainder of 2023 and OCR will stay put for longer, go up a bit more even.
Depends on whether you mean quarterly inflation or yearly. Yearly will continue to decrease as the big quarters fall off the other end. If the previous 3 quarters were the same as this one then yearly inflation would be 4.4%.
It also depends what happens with food prices, there is a reasonable chance the fruit and veg could go down instead of up if the weather goes back to some kind of normality.
This year is about 3 standard deviations above the mean - see here Climate Reanalyzer
Another take warning of Climate reanalyzer.
https://youtu.be/qnSyDr0F9_M about 1m:30s in
Prices would still be going up, Inflating, at 1% PLUS, compounding whatever they had gone up in the previous year(s).
A function of a Debt bases Financial System is that prices MUST rise every year to allow more Debt to be created - to pay off past Debt + Interest. We all know that. But unless this figure was -7.3%, then last year's price rises, that we are now comparing this year's to, are baked in as we move forward
(And next year it will be 7.3% + 6% that we are using as the comparator).
This is good news, we are on the right track. Some inflationary pressures could arise next quarter as the article suggests but should be more than offset by the spending constraints slowly feeding through the rest of the year as more mortgage holders rolling onto higher rates. Hopefully a soft landing is the final outcome.
I am all for soft landing to protect people's livelihoods. We obviously don't want a repeat of 2008 and what it did to our construction and allied sectors. These sectors combined provide the sheer bulk of decent-paying blue-collar jobs in NZ.
However, that's clearly not why some commentators want a soft landing. They want the debt-fuelled housing Ponzi to restart ASAP to grow their paper wealth while working classes continue drowning themselves in debt in order to afford a roof over their heads.
I call bollocks on a soft landing.
Inflation is still 6% - way too high. Mortgage rates are high and unlikely to come down much over the next 9-12 months, and lots of people still to roll over to higher rates.
Costs of essentials like food exorbitant and still rising. Fuel and public transport rising again. Insurance, council rates etc.
Construction sector slumping - big employer, directly or indirectly.
Low unemployment rates will come to an end. I’m in residential construction and it’s feeling like a ghost town. The backlog is getting very skinny and new enquiries are scarce. Then you’ve got to compete with all the other companies that have quoted the work. It’s getting tough
After I rang a surveyor and got quoted a price just to find one boundary peg in the suburbs, the price of $2800 made me get out my really long tape measure out to 17.15 meters and x now marks the spot for a future fence post should I put up a fence. When the survey cost is about the same as a 1.5 meter fence materials wise its a yeah nah.
It's a 2.1% increase for the quarter. For inflation to be within the band of 1-3% (which is what it needs to be before the OCR can be reduced) - you would need non tradeables and tradeable inflation to be .1% and.2% a quarter respectively for the next 3 quarters (total of .3% per quarter). Not going to happen - given fuel and transport increases will flow through next quarter.
It's a 1.1% increase for the quarter which is 4.4% annualised based on this quarter.
"which is what it needs to be before the OCR can be reduced" - not necessarily, the OCR is set based on future projections not current conditions. The RBNZ may start releasing the brake a little before they get to the desired speed.
Tradables 0.8% QoQ (5.2% YoY)
Non Tradables 1.3% QoQ (6.6% YoY)
The non tradable (domestic inflation) is still running hot... since June 2021 the QoQ change has been 1.2, 1.8, 1.5, 1.5, 1.4, 2.0, 1.5, 1.7 and now 1.3%. It's just that imported inflation is back under 1% QoQ which is pretty much normal. Wouldn't be celebrating yet!
No I don't... Still much higher than analyst expectations and domestic is still in rather high range > 1% QoQ. With petrol going up due to undoing the tax cut, that will flow on to the rest of the economy you would expect (as energy is an input cost for almost every business).
Sure, it's not all roses, but looks to be going in the right direction to me. Food prices have had a massive impact, that is now coming to an end. NZD should continue to strengthen from here, so as long as there are no major oil shocks, price at the pump should drift lower. Can't have it all, but this looks to me to be playing out as it's supposed to.
And therein lies the problem - For years we have been bailed out by low or negligible inflation from overseas. Its a very big gamble to assume that this will continue -and the Reserve Bank is not meant to be a gambling entity - nor playing politics as it is now
Meantime domestic inflation rolls on and no productivity gains to match - nor a trade balance -which the Australians at least have if we want to compare ourselves to them
And especially when we still need house prices to drop
Great point. The Aussies have a booming mining sector to fall back on. The race to decarbonise and electrify everything is driving greater demand for commodities, which should keep those cash mills in WA and Qld humming for a while.
A good number of feasibility studies are currently underway that involve Aussie players moving up the commodity value chain with cheaper power from the abundant untapped renewable resources around the country.
Though many of these will not go through to full-scale operations, there is a genuine attempt to reindustrialise the economy while NZ is still unable to think beyond housing speculation.
Oh so we should do what's best for the top 1%? We are currently living in the greatest wealth inequality this country has seen on record. And the solution is to prop up the top 1%?
You're right it's not about me - it's about everyone.
If you left your decile 10 echo chamber you might have some sympathy.
-SMG.
Nice - well said scooter! I own my home out-right and have no issues with values being pummeled whatsoever. In saying that, I wouldn't want them falling too far whereas it wrecks the economy in the process. Just enough to teach the pitfalls of greed. Another 20% should about do it. The RBNZ have done the analysis and the financial system would live on.
Homes are for living in, not speculating on.
I always laugh at the cult blaming the elderly. One day you will be old and the young will be blaming you for everything under the sun.
Lots of people seem to think older people didn't have adversity, difficultly in their life. When someone gets older the body get weaker, they have may have children or grand children to support. Older people do not have the same job opportunities as young people and if you loose a job over 50 it's not that easy to find another one. Ageism is alive and well.
So older people do what they have to do survive. Moral grandstanding doesn't pay for medical bills, rates, insurance, food etc. However I'm sure most agree that houses are insanely high but the problem is not old people. Blaming the so called boomers is cowardly.
He’s just a jealous f?ck. If prices tanked I’d probably go buy a couple of 3 bedroom brick and tile places. Warkworth maybe? Sorry to tell you Scooter but us boomers (I’m 57, sure I’m one), drive shitty cars, travel frequently and still run sub 22 5k runs. How’s the widening girth of NZs youngsters with a chip on their shoulder they can’t sleep at night. Whine, whine, whine.
If homes reverting to affordable values wrecks the economy/financial system, there's something flawed in both. Maybe we need the wreck to learn that pitfall.
What is the appropriate affordability metric anyway? It makes more sense to own one's home in 10 years rather than 30, freeing up disposable income for natural savings instead of needing to speculate. Less debt makes more sense than forever trying to increase incomes to catch up. And let's face it, incomes probably do need to increase for the bottom earners but not at the top. This is what feeds the alleged wage spiral.
I'd suggest that it's our financial speculation on everything is the root flaw. It leaked into housing because there was nothing else left. The rise of crypto, NFT etc is just an extension of the same. And through it all we just keep giving more power to the financial institutions, we keep handing over more "ownership". And somehow we believe we're getting richer because of it.
Maybe to feel "wealthier", to have freedom and security, we need less asset speculation and more purchasing power in our money? Maybe, if we the people weren't grinding it out for basic needs and necessities, for "retirement", we could actually create a better world than what our so called leaders, rulers and experts seem to be imposing on us?
Rubbish. If someone suddenly sticks a tax on something you were not paying a tax on to the tune of thousands of dollars you would be the first one to scream. The tax is never going to fly, its not the 1% that are affected is the 63% that are property owners, the suggestion of yet another tax is a political death sentence and Labour knows it.
I agree another tax doesn't solve the problem, the issue is much deeper than that.
I've also been saying (for too long now) that we do need to remove the distinction between revenue and capital income in the Income Tax Act. It results in an inequitable taxation of labour over capital and is no longer fit for purpose. It would allow income from capital to be taxed equally or more than income from labour, providing a wider tax base and even allowing for taxes on labour to be reduced. Yes it would remove tax free gains but maybe if more people were incentivised to earn their income there would be less asset speculation and chasing of capital gains.
Care to explain how inflation is more damaging to young people?
Last time I checked, more affordable asset prices and ending NZ's top 1% property hoarding obsession was a good thing.
Also don't use the 'it's bad for FHBs argument' - that's pure REA garbo. I'm in my late 20s and have 1 friend that owns a house - FHBs are majorly wealthy immigrants.
-SMG.
I agree, inflation can be a good thing for certain groups:
- For existing home owners with debt like myself, the current rates make it difficult to afford repayments but the mortgage is being eroded away
- For people who don't have assets but want them like yourself
- For people with term deposits (I actually disagree with this point but they seem to like it)
Its not so good for people that can't afford day to day living.
Are you saying stats.nz are lying? In a low unemployment scenario why wouldn't you ask for at least inflation?
You only lose bracket creep, that would be tiny. Otherwise your post tax income goes up by the same percentage as your pre tax does.
Sure your situation may vary from the average, that is always the case. I remember people saying that they didn't get a pay rise for 3 consecutive years back when inflation was 2%.
Because young people need to buy stuff - which is going up in price faster than their after tax pay increases ( lots of old/er people already have what they need -many dont even work so dont really care what happens to transport costs at an individual level but will complain about the price of their flights to Brizzie or Fiji which of course are entirely discretionary spending)
and the ridiculous price rises of existing property (and rents) are truly inflationary even if they dont all show up in the CPI - they do support very inflationary building costs for new builds
so house prices (and rents) coming down (deflationary) would be a good thing for young people right - although tough on some of those that already purchased and are now underwater
It comes down to disposable income. If you're renting, your costs will rise. Stated increase in rents of 4+% is less than the annualised rate of inflation, but this may not be significant if your disposable income holds up. The downside is on your cash / investments. You need any investments to be achieving better than inflation, or their real value is going backwards.
If you want to get into the housing market, the decline in values seen in the past two years could be very helpful, but you still need to have a decent deposit, which is why you'll want your cash to be performing above inflation.
Another report on this site says the sluggish housing market has just meant many vendors are sitting tight - no-one who doesn't need to sell will be listing, so your choice of options are reduced. That said, I'd say it's still leaning toward being a buyers market. Personally, I've lost $1-$2 million in the past couple of years of the values of my properties, but I'm not particularly concerned. They're still paying their way and my tenants will soon be getting the annual rent increase notice to cover increases in insurance, rates, etc. The rise in interest costs is, of course, unwelcome but doesn't really concern me greatly and won't have a significant bearing on the rent reviews. The interest limitation rule effect, however, is something I do frown at, and will be passing on, so my tenants will know who to vote for in October.
Oh, btw, National know that many young people don't vote and those that do and vote left, will vote right when they grow up.
I'm a boomer and I've been taking advantage of the interest rate hikes. It's been wonderful, and I'm planning on building another house, I got $300,000 off a very nice couple of acres with country views, a pond, close to Auckland, quiet, and 2 minutes to the nearest town.
Lets all pretend that an inflation rate of 6% is wonderful, the Reserve Bank's job is done and dusted, rate cuts next! LOL.
When the reality is that non-tradeable inflation has barely budged at 6.6% and since that's the only part of the equation that the Reserve Bank OCR impacts, its pretty clear that interest rates are nowhere near high enough.
Forecasts for oil prices is for them going higher. If immigration reverses from net losses to net gains then that's going to push rents higher.
...next quarter will contain some extra inflation pressure as Government fuel tax cuts and public transport subsidies ended on July 1. Council rate increases will also be high.
That was my thought as well, the benefits of falling petrol prices will be offset by increased taxation. Also oil appears to have reverse course and prices are increasing again.
RBNZ will need to keep raising rates, I don't foresee any reprieve.
Edit to add:
In fact bonds move up meaning Mr. Market thinks a hike is more likely as well.
Inflation drops to 6% as petrol prices decline and interest rates suppress demand, but domestic inflation remains high.
The Deflation Is Here, and It Wasn't the Rate Hikes
Low interest rates aren't stimulus; that's a modern myth invented by desperate officials who lost control over money many decades ago. Right now, low rates w/mkts that are absolutely certain they're going lower still is depression economics. Not inflation. https://buff.ly/3IGqrqy Link
Non tradeable inflation is still very ugly. Effectively NZ businesses continue to pass through as much cost (some of which may be profit) as possible to the population.
All bubbles though are bound to burst and the collateral damage could be huge.
An example in our family, we now support more overseas food producers than Kiwi ones - this week Cadbury chocolate is $3.50 a bar at New World compared to $6.50 for Whittakers. SPC fruit cans are $2.14 instead of $2.99 for watties. Times are tough, mortgages need to be paid and I cant afford NZ food. I realise that doing this means less kiwi jobs in the future - but i can only worry about now.
Re: chocolate, I'm guessing (based on taste) that Whittakers ingredients are higher quality. I don't know why anybody would buy Cadbury when Whittakers is available if price were not a factor, but I agree that the price differential is now unjustifiably wide. The other day at my local PnS you could get two Cadbury blocks for less than a single Whittakers. I'll sacrifice a bit on quality for that kind of saving.
There is also the brand effect; Whittakers has positioned itself well as a more premium product, and also played to Kiwi parochialism. That's got to be worth something to some buyers.
Agree. It doesnt matter how cheap Cadbury gets, its horrible. I've stopped buying it since they changed the recipe. And lets not even talk about how disgusting the new Roses chocolates are. Lindt would be my second choice. Buy dark chocolate, you dont need to eat as much of it to get a chocolate fix.
So $1.93 per 100g vs $2.60 per 100g -still a big difference in price -especially for families doing it tough. A similar argument could be put forward for Mince vs Sirloin Steak - one is 19.99 a kg and one is $27.99 a kg.
You might prefer steak based on quality but you can only afford mince.
Well the issue with mince is it comes in up to 4 different grades. I will take premium mince any day in my Bolly over a random bit of Sirloin. The problem with steak in general is that the quality is so random and lets be honest here, its almost totally tasteless so you still have to sauce the hell out of it, marinate it or do something with it anyway. If I eat steak these days its eye fillet from New World, it actually has taste and even the cat eats it although I think he prefers smoked salmon.
Cadbury blocks have been shrinkflated to 180g now, where Whittakers are still 250g, so you're getting about 40% more chocolate. Comparing Cadbury dairy milk to Whittakers creamy milk, Whittakers is higher in both cocoa solids (33%) and milk solids (30%) than Cadbury's offering with 28% and 24% respectively. So Whittakers has more premium ingredients and has a smaller factory so is going to be more expensive to produce.
The closing of the Cadbury factory in Dunners still rankles a few and may also affect buying decisions.
the difference in cocoa and milk between whittakers and cadbury is basically 100% extra sugar in cadbury (56% vs 45% sugar content for std chocolate). cadbury is really vile stuff from a taste perspective. if whittakers is too expensive then nothing is the better option.
Zollner of ANZ: "The RBNZ will be disappointed with that. Non-tradable inflation looking sticky; price increases still broadening"
https://twitter.com/sharon_zollner/status/1681446320345874435?s=20
Kelly Eckhold of Westpac: "Inflation was higher than we expected. Especially the more important non tradeables piece - up 1.3 for the quarter and 6.6 for the year. A slow decline - interesting!"
https://twitter.com/kellyenz/status/1681439875890053126?s=20
These are 'bank economists" ...
They are paid by banks ...
The banks have a vested interest in ensuring rates stay high until all roll-overs are re-fixed and ...
... Fixed long so the banks make even more money!
I am sick and tired of people quoting these far-from-indpendant and far-from-impartial 'bank economists'!
Example:
If the objective is CPI 2% each year, then after Year 1 a $100 widget would be repriced to $102. In year 2 it would be $104-40 and in Year 3 it would be $106.12.
But what we have at the moment is CPI 7.3% after last year; Year 1 and that same $100 widget was repriced to $107.30 and year 2 (this year at 6%) it would be $113.74 and in Year 3 (a guess at 3%?) it would be $117.15.
So unless you got an ~17% income rise, you have not kept up with Inflation over that time.
I don't disagree with you Jimbo. Losing in a bit of trust in all parties to genuinely help out nzers.
But this is guy is especially just the pits: https://www.rnz.co.nz/news/national/494037/good-economic-management-nee…
Interesting - good on you. I am used to the noise of squealing when things go against landlords and silence when things go well. All the benefits of running a business and none of the risks.
I have owned rental properties in the past - some years you make money and other years you don't. As the provider, you are able to buffer those changes and provide a stable rent.
Much happier now I've just got my own home and a share portfolio - made me nervous having such a concentrated asset in the hand of someone else.
The landlord is the 'user'
The 'user ' of people to pay for an asset that they never receive title for.
Landlords just don't care to understand the miserly and loss of hope they have created amongst so many.
Sitting back, clicking the ticket and wondering why we have such social dysfunction in NZ.
No appreciation how sole destroying it is to pay across such a huge % of a wage for a s##tbox to a person doing nothing.
No chance of getting ahead - just but assisting another to increase their wealth.
Join the dots.
B-b-b-b-b-b-but where will young middle income earners live if Landlords didn't jump through hoops to outbid them on entry level properties?
They're just "Mom and Pop" landlords trying to get ahead and prepare for retirement, and the evil Government is now telling them they can't offset the interest costs on their 100% loans and the dumps they overbid on need to meet minimum health standards, much like restaurants and other businesses do.
Why weren't you also arguing the opposite of this in the years when the OCR was dropping?
i.e. central banks create deflationary forces by reducing debt/interest costs for businesses, limiting price increases in goods/services and measured CPI.
(while pumping debt/asset bubbles).
Lookin' good!
1. adjust for 'food price' normality based on more stable weather and reduced import prices
2. adjust for rents leveling due to increased supply and assuming immigration remains controlled
3. adjust for the smallish increase in fuel costs (and yes they are not that big)
4. adjust for imported 'deflation'
5. adjust for employer bargaining power (i.e. no further wage rises for workers!)
Overall - we're are on the track I expected. Still picking the economy to tank between now and Christmas ... and with carnage all around ... OCR cuts soon afterwards. Probably Feb / March / April.
If you're dealing with our greedy banks then your message to them is: sharpen your pencil!
(Have I mentioned that the OCR is an inequitable tool that is well past its use-by-date? Have I also mentioned that the whole of the MPC at the RBNZ should be sacked?)
Looks about right.
But just be diplomatic when you are sharpening your pencil at the bank. What would any of us do if we couldn't get a replacement bank account - anywhere? Nigel Farage seems to have found that out the hard way.
Mr Farage now says he cannot get an account with any other bank, having been turned down by 10 banks since Coutts withdrew its services. Members of his family have also been refused accounts by other banks, and one family member was told their account was being closed.
https://www.telegraph.co.uk/news/2023/07/18/nigel-farage-coutts-bank-ac…
That might be the least of their problems, given where Japan has been for +30 years, and China seems to be heading that way now. Both countries being the powerhouse economies of their eras. If so, we have a massive Deflationary Bust ahead of us all. The one we have spent the last 15 years odd trying to avoid, but underneath - it's still there. The Inflation 'problem' we have at the moment is the result of trying to avoid that Deflation - at any cost. That probably still has a way to run as economies try to engineer the mythical soft landing. But once that has run its course, 'more of what failed last time' isn't the answer. Letting The System reset, is.
Now that comes as a a surprise. Why higher?
My view is that the range needs to be squeezed to allow continued real money supply growth. (While noting that many other countries have yet to catch up to much of the 'restraint' of 'developed' world - where, in this case, I'm defining 'developed' as those with central banks who really have no idea except to do what banks tell them.)
I think CB's will not be able to get inflation back to 2%, but they will succeed at plunging their countries into a deep recession. When that time comes, the CB's will give up their fight against inflation to "save" their economy. They will then have to justify accepting a higher inflation target.
Let's re-visit this post at the end of 2024
I tend to agree Yvil. I think that even if we see proper recession, it won't help inflation. CBs will be awkwardly wedged between immovable 4-6% inflation and rising unemployment. Perhaps after a year or two of that they'll start trying to think of ways to attack inflation without raising rates, and stimulating the economy without creating bubbles.
Absolutely. Can't believe they release the "we have turned the corner" report on inflation when adding in another 2-3 weeks of latest data shows that is not the case. Petrol up. Rates up. Food up and up. All things most cannot avoid.
Interest are not in decline, and if anything have higher chance of only going up.
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