ANZ economists say the odds of the RBNZ sitting out 2015 are growing by the day with an 'extended policy siesta' possible

In their weekly Market Focus report ANZ's economists note interest rate markets have entered a period of "risk off" following the release of dovish US Federal Reserve minutes, cautious speeches from global policy makers, and sharemarket gyrations. They say dovish overtones from the Fed highlight New Zealand's yield advantage, help keep the New Zealand dollar elevated, and maintain downward pressure on OCR expectations.

Hmmmm;

The old adage that if something is repeated often enough it is soon assumed to be true couldn’t be more apt with respect to the Fed’s 2% inflation target. Last week, Bloomberg had a piece that did exactly that, describing how “Federal Reserve officials are hunting for new tactics to raise price increases to their target”  because “inflation is descending toward the danger zone”.

In fact, the September meeting notes cited several officials who worried that “inflation might persist below” the committees target for “quite some time.” Accordingly, the Bloomberg author, Craig Torres, pulled out his editorial pen and offered his opinion as if it were objectively obvious:

 

The Fed needs a clear strategy for getting the inflation rate higher after falling short of its 2 percent target for 28 consecutive months.

Well, now. Twenty-eight straight months of misses. Let’s see, even using the Fed’s systematically understated measure of inflation, the PCE deflator ex-food and energy, consumers’ savings and paychecks have lost 3.3% of their purchasing power during the last 28 months.

Apparently, had they instead suffered a 4.7% loss of purchasing power (2% inflation for 2.33 years) everything would be copasetic. Instead of remaining in a funk, as has been evident since it unexpectedly snowed last winter, they would have been spending up a storm. Presumably the US economy would have long ago hurtled through that pesky “escape velocity” barrier.

Isn’t it amazing that over the relatively brief period in question that shrinking the purchasing power of the dollar by 4.7%% versus 3.3% could make such a profound difference. Or maybe not. Read more

Let's face it, the QE ponzi racket of inflating assets values, and securities in particular, ran out of puff as the elevated levels of 'out of thin air' cash exchanges for government related securities became unsustainable.

The market has been trying very hard to deflate........they should all stop interferring and leave the markets to work its way through...They are only creating other long-term issues that will have consequences!!

Central bank manipulated and controlled economies hurts the people!!!

Cuts more likely than hikes.  

Unless NZ wishes to join global recession quicker. 

2015 likely to be 'interesting times'.  

Yes, they then used the feb 2011 chch earthquake as an excuse to cut them 50bps back to 2.5%.

At that point (start of 2011) the property market was struggling after a dead cat bounce, since the feb 2011 rate cuts auckland prices have raced away, up about a third or so.