Here is today's statement from the Reserve Bank

Here is today's statement from the Reserve Bank

The Reserve Bank has lef the Official Cash Rate unchanged at 2.25% as most economists expected. The dollar immediately shot up by about a cent to well above US69c.

Here is the statement from RBNZ Governor Graeme Wheeler:

The outlook for global growth has deteriorated over recent months due to weaker growth in China and other emerging markets.  Prices for some commodities, including oil, have picked up but remain weak.

Monetary conditions are extremely accommodative internationally, with considerable quantitative easing and negative policy rates in some countries.  Financial market volatility has eased in recent weeks, but markets continue to watch closely the policy settings of major central banks.

Domestically, the economy is being supported by strong inward migration, construction activity, tourism, and accommodative monetary policy.  Dairy export prices have improved slightly, but are below break-even levels for most farmers.

The exchange rate remains higher than appropriate given New Zealand’s low commodity export prices.  A lower New Zealand dollar is desirable to boost tradables inflation and assist the tradables sector.

There are some indications that house price inflation in Auckland may be picking up.  House prices remain at very high levels and additional housing supply is needed.  Housing market pressures are building in some other regions.

There are many uncertainties around the outlook.  Internationally, these relate to the prospects for global growth, particularly around China, and the outlook for global financial markets.  The main domestic risks relate to weakness in the dairy sector, the decline in inflation expectations, the possibility of continued high net immigration, and pressures in the housing market.

Headline inflation remains low, mostly due to low fuel and other import prices.  Annual core inflation remains within the target range.  Long-term inflation expectations are well-anchored at 2 percent.  However, as we have previously noted, there has been a material decline in shorter-term expectations.

We expect inflation to strengthen as the effects of low oil prices drop out and as capacity pressures gradually build.  Monetary policy will continue to be accommodative.  Further policy easing may be required to ensure that future average inflation settles near the middle of the target range.  We will continue to watch closely the emerging flow of economic data.

 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

34 Comments

Comment Filter

Highlight new comments in the last hr(s).

I guess I won my bet. When the whole thing goes belly up I do hope people remember the RBNZ sat on their hands

mmm, I wouldn't neccessarily say that..
Such a comment highlights some big gaps in your understanding of the situation.
A more appropriate metaphor would be that the RBNZ has been forced into a corner, handcuffed and psychiatrically tormented by narcissistic imbeciles.

Nah, no gaps. They have tools and options to use but refuse to use them. Your lack of admitting that shows you really don't grasp who the RBNZ actually protect above all else. They are called Banks. The government can do much yes, but the RBNZ set the banking rules which is funding this ponzi

This is some Illuminati stuff, Justice. Central Banks are very different to corporate banks. Please never confuse the two.
I actually have a Masters in Econ focused on monetary economics, so have a little bit of understanding on the topic.
Economics is the science of balancing inputs and outputs. Sure the RBNZ has a good suite of tools at its disposal. However, it is not adequate to say that they can simply pull this lever, or that lever. It is very seldom (if not completely unheard of) that asingle tool impacts only one specific aspect of a macroeconomic system. Thus, the requirement for balance and a exceptional understanding of the short, medium, and long term impacts of the adjustment.

Economics is not..a science. It's very simple math if done right. Illuminati?

You're right justice.

"University economics teaching isn't an education: it's a £9,000 lobotomy"

http://www.theguardian.com/commentisfree/2014/may/09/university-economic...

Economics took a battering after the financial crisis, but faculties are refusing to teach alternative views. It's as if there's only one way to run an economy

Economics is a farce. How many different versions of economic theory have been implemented and rewritten over the last century. It is only another means of control and completely ignores natural laws.

The root cause/problem will never be solved unless we the people wake from our ignorance. For centuries we have continuously allowed ourselves to be enslaved to minority groups and institutions. We have allowed "wealth" and power to accumulate in the hands of a few and we are left fighting and competing against each other for whatever is left. We have allowed ourselves to become enslaved to our own egos, greed and selfishness. We have allowed ourselves to be ruled by fear. We have become enslaved to materialism and the concept of wealth.

We have lost all sense of community, cooperation, sharing and kindness.

This, "let's get together and hug it out" stuff is the true farce.
I'm sorry to break it to you, but your "natural laws" are more devastating than any economic doctrine. Everything you mention and allude to as being the fault of modern economic theory is indeed the product of biological evolution. Not our ability to study/understand and control it.

Community, cooperation, sharing, and kindness are not natural laws. They are ethical laws largely influenced by religion. And, we all know that there has been no greater example of subjugation than that seen throughout the history of religion.

Yep , I never voted for the Judeo-Christain ethic which pervades our society. John Gray ( the philosopher) contends humans are driven by "animal spirits".

"There is no heresy or no philosophy which is so abhorrent to the church as a human being." James Joyce

You're saying math, however simple, isn't a science? Now that's Illuminati stuff.

Yay, we have another troll folks. One who can't distinguish between math and the sciences

Ha.
Is that what you say to everyone who disagrees with your less then logical comments?

Yes, there should be some sort of policy banning this name calling.

Probably have to drop half a percent in June if not earlier

When are the announcing the next round of macroprudential regulations to reign in the Auckland property market?

When are the announcing the next round of macroprudential regulations to reign in the Auckland property market?

the Financial Stability Report is due out in May, and the June OCR is a full MPS. So expect MP in May and a cut in June.

NZ continues its high interest rate policy.
Immigration now raised as another reason to keep high interest rates.

why should wheeler take the fall for a government that will do nothing.
its time the pressure was put back on them so he can lower the rate

At this point SH they are part of the problem and offering no solutions. They talk bollocks and deserve every ounce of criticism also

Further policy easing may be required to ensure that future average inflation settles near the middle of the target range. We will continue to watch closely the emerging flow of economic data.

Why would it given nothing is left after capped wages pay banks' interest rate tribute for that which is not included in the CPI?

More mumbo jumbo, yet again.

Sitting on your hands with your fingers crossed is not a position anyone can put up with for long.

Yes. Wheeler is sounding more and more like a man kicking the can down the road. And I thought he was a man of action. Silly me.

The traditional central bank tools of raising or lowering interest rates and printing money no longer work. The situation is becoming increasingly desperate for numerous nations from Japan to Venezuela......even Australia.

Graeme Wheeler's statement is the closest we've seen so far in NZ to an official admission the system is failing.

Dairy farmers could set up farm-stays for the millions of Chinese visitors JK is organising.

"A lower New Zealand dollar is desirable to boost tradables inflation and assist the tradables sector."
Well, lower the OCR then, housing is a separate issue, let it be.

"Long-term inflation expectations are well-anchored at 2 percent"
Really ??? Come on, Australia has just hit deflation and NZ hasn't hit 2% inflation in years...

"Long-term inflation expectations are well-anchored at 2 percent"

Yes they are.. and we won't be able to get or move them from that place...

Haha, well said with emphasis on "EXPECTATIONS"

The non trade-able inflation figure is around 1.6%. Once the effects of the drop in oil prices (i.e. trade-able inflation) is removed later in the year inflation will rise.

No one is sure of anything, no one knows what to do, what will work and what will not..
Status quo or Fiddling at the margins..all same. No one has a clue. As long as one gets paid heaps...
GFC and QE have really screwed up stuff long term...
Time for another JM Keynes ?

Speculators like NZ property and NZ Dollar and they are attacking with much money generated by QE.
Good luck controlling any thing...

Is there an economic model that doesn't require inflation as a core component? How does it work?

I suppose anything that's not centered around 'growth'.
.