Here's our summary of key economic events overnight that affect New Zealand, with news financial markets are now more convinced rate cuts will be coming in 2024 as inflation transitions away.
First up today we should note that the US Fed will announce the results of its latest FOMC meeting soon, at 8am NZT. No-one is expecting them to change any rates today, leaving their policy rate at 5.5%. But markets have increasing expectations that some sort of signals will emerge about how and when they will start cutting that rate in 2024. Of course that is almost all to do with how they see inflation tracking in the US and where they think it may settle. Benchmark bond yields have sunk in anticipation of those meeting details. There seems little pressure on the employment mandate they have, and little indication that their jobs market is about to change, so that is now only a background factor.
After rising strongly for the prior three weeks, last week these was a correction in the number of mortgage applications in the US, dropping -7.2% from the prior week. This was despite no change in benchmark mortgage interest rates.
The ADP employment report showed private businesses in the US added +107,000 jobs this month, below forecasts of +145,000. It also showed that the pay premium for those switching jobs has now evaporated. This is the report that comes just before the US non-farm payrolls report for January that is out this weekend. That is expected to show a gain of +180,000 jobs in the month, although analysts have consistently underrated the strength of the US labour markets recently.
Elon Musk, the world's richest person, answers to no-one. He has even tied regulatory agencies of the US Government in legal knots. But he got a comeuppance today in a Delaware court, one that threw out his self-written pay deal at Tesla (after a shareholder challenge). Here is the judgement. It's worth a read, especially the first few pages. (It is also interesting to see two of the seven members of his patsy board are Aussies.) Musk is no longer the world's richest person.
China's official PMIs for January were out yesterday. The factory PMI was unchanged at 49.2 maintaining the December contraction. It was their fourth consecutive month of decline and the ninth in the past ten months. Their services PMI expanded slightly more than in December at 50.9 and up from 50.4. Their services sector has never slipped into contraction in these official surveys. So overall these surveys record a slight expansion in January.
Yesterday, China moved to merge more than 2,100 rural banks with about NZ$11 tln in loans (assets) in a move to contain growing financial risks. These banks have been hit by by bad loans, shrinking margins, and slowing growth.
And staying in China, it has been reported that investors sold out of ¥14.5 bln (NZ$3.3 bln) worth of mainland equities (net), a sixth month international investors have pulled back. This is the longest and strongest retreat from Chinese equities in a decade. Actually, the data was nested in a whole range of other 'positive' quoted comment because it is now a general crime to “denigrate China’s economy” through “false narratives.” The Ministry of State Security is watching. It is going to make watching the actual performance of the Chinese economy even harder. Everything is 'security' in China these days.
Meeting notes from the last Bank of Japan review shows that more members are coming to the view that they need to shift their unusually low rate up soon. This will be a very big deal when it happens.
Singapore is in the sights of Chinese regulators cracking down on illicit money flows. Oddly, the crackdown is on money flowing in to China, not out.
Inflation in Germany fell below 3% in January, its lowest since June 2021. Lower costs of energy enabled the drop to 2.9%. Without food & energy, their rate was 3.4% and also its lowest since mid-2022.
In Australia, the Federal Court has declared that Westpac engaged in unconscionable conduct in October 2016 when executing a AU$12 bln interest rate swap transaction, the largest of its kind in Australian financial market history. It did pre-hedging ahead of an interest rate swap transaction with some large customers. Westpac will pay a fine of AU$1.8 mln as a penalty and reimburse ASIC $8 mln for its investigation and litigation costs. No one will go to jail though, and the costs of the behaviour are a rounding error compared to Westpac's profits. Lessons are probably not learned here.
Australia's inflation rate came in lower than expected at the end of 2023. The quarterly CPI was 4.1% from a year ago (a two year low) and well below the 5.4% in Q3-2023. Markets expected 4.3%. And their Monthly Inflation Indicator for December alone came in at 3.4%, a big drop from 4.3% in November and well below the expected 3.7% analysts were expecting. Both are substantial shift lower and paint a picture of fast-easing price pressures.
These results sparked a rise in the local equities market, and a sharpish fall in bond yields as markets start to price in a 0.25% cut in official interest rates by August. (For reference, markets have priced in almost two -0.25% cuts by then here in New Zealand.)
Global air cargo volumes rose +10.8% in December from a year ago, meaning 2023 volumes fell only -1.9% over the whole year. But the year ended with December volumes +2.3% higher than December 2019 volumes, pre-pandemic.
The UST 10yr yield starts today at 3.96% and down -12 bps from this time yesterday as bond markets start pricing in anticipated Fed rate cuts. The key 2-10 yield curve inversion is less deep at -27 bps. Their 1-5 curve inversion is little-changed, now by -81 bps. And their 3 mth-10yr curve inversion is deeper at -141 bps. The Australian 10 year bond yield is now at 3.99% and down -18 bps from yesterday in a significant move. The China 10 year bond rate is down -4 bps at 2.44% and a new twenty year low. The NZ Government 10 year bond rate is down -8 bps at 4.66%.
Wall Street has opened its Wednesday down -0.7% on the S&P500 and now off its record highs. Sentiment was hurt by Big Tech results coming in less than expected. Overnight, European markets were mostly -0.4% lower. Yesterday Tokyo ended its Wednesday session up +0.6%. But Hong Kong fell another -1.4% and Shanghai was down another -1.5%, both reflecting increasing local gloom. The ASX200 ended its Wednesday session against the international grain, up +1.1% and to a new record high. But the NZX50 ended down -0.4%.
The price of gold will start today up another +US$15/oz from yesterday at just on US$2050/oz.
Oil prices are down -US$1.50 at just over US$76.50/bbl in the US while the international Brent price is now just over US$81/bbl.
The Kiwi dollar starts today at just on 61.4 USc and +20 bps firmer than yesterday. Against the Aussie we are also up +20 bps at 93.1 AUc. Against the euro we are a touch firmer at 56.6 euro cents. That all means our TWI-5 starts today at 70.3 and up +10 bps from yesterday.
The bitcoin price starts today firmer yet again. It is now at US$43,492 which is up +0.7% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.7%.
The easiest place to stay up with event risk is by following our Economic Calendar here ».
90 Comments
'Later, Luxon rose again, seeking leave to correct his answer'
Roll up. roll up, the three ring circus is in town.
Gaffes not intent. .
Whatever else could you expect. As Mr Trotter ably explained last year the electorate had little choice other than to vote for the least worst. Now we will undoubtedly witness a form of replay of post 2017 where newly furnished ministers realise that their words spoken while in opposition , attach little reality to the job on hand.
The least worst is yet to be determined.
I see the government is now rolling back pay-day lending restrictions too.
Depends what you're after.
If your main concern for government is effective and efficient technocrats, pretty hard to get worse than the last 6 years.
If you're all about signalling and fluffy rhetoric, the current lot are going to underperform.
Would they even know how to underperform or still need advice on that?
Neither of those metrics are a measure of effective governance. The first measure of competent government would be an understanding of basic ecology. The second would be acknowledgement of a finite, round planet. The third would be cramming more humans into this finite space means a declining quality of life.
So rating the past government on performace and the current government on policy promises, would go something like, dumb and dumber.
Supply of core services should be a basic of any government.
Yeah sure. But take the magical thinking out BEFORE the promises of exponential growthist fantasyland. The clowns we have in government only know how to extract.
Much of the solution isn't really a political thing, it's a human thing. Unless people actually change, the clowns in government, are always going to be clowns.
A government that forces people to change, usually don't end up being a very good government.
If we can't effectively address basic core services, then addressing such problems as you have highlighted is the magical thinking.
argumentum ad odium.
Not sure that saying the Technocrats are wrong and need to do more with 7.5% less money so that billions in tax cuts for property speculators can be funded is "least worst".
How far can the bar be lowered with these clowns?
Under the direction of the new Minister of Oceans and Fisheries Shane Jones, New Zealand is set to push for bottom trawling to continue in the South Pacific and argue against increased ocean protection for vulnerable habitats at the annual meeting of the South Pacific Regional Fisheries Management Organisation (SPRFMO) that begins today in Ecuador.
The New Zealand government may now be the main obstacle to a proposed conservation measure that its own scientists spent the past year developing, one that would protect 70% of high biodiversity areas (like seamounts) within bottom trawling areas, leaving 30% open to the industry.
The voting public generally want things as cheap as possible.
If there was a "we'll stop doing all the bad stuff to the planet and each other but most of you will get a 70% drop in lifestyle" party, pretty sure it'd never get in.
All depends on the messaging doesn't it? After decades of being ear bashed by media about the shop till you drop mantra, coupled with trickle up economics and you have a populace dumbed to the point survival becomes a secondary concern. This is trained behavior. It can be untrained.
Those are the core facts.
People will say they want fair pay, clean and green, etc, but most aren't really aware of the consequences.
Huge parts of how we're living, cannot continue if we expect actual, meaningful change. Given how individuals can't even come to terms with "if I eat bad food, I'll get fat", she's pretty hard to see them crossing the barrier to living subsistence lifestyles.
Subsistance? That is the scenario we are actively pursuing right now! Party like there's no tomorrow, then back to the cave.
There was a time, not so long ago, people lived happy healthy lives without trashing the planet to the point of no recovery.
"if I eat bad food, I'll get fat". Have you seen photos of a group of under 50yo people from as recently as the '70s, where there were many/any fat people? This is learned behavior with decades of industrial strength Bernays style mind control applied, along with industrial strength toxins to what we consume and our living space. This is all completely normal (sarc)!
"We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of."
This is not behavior for a species wanting a future!
Any person right now can make a choice between constantly craving more and consuming more than they need, and living a life of basic necessities, appreciation and gratitude.
But I have seen societies of high devotion and millennia of practicing such views have their young people leave in droves for one more akin to the high consumerism we live in - with little input from the same sorts of self interested corporate entities we are embedded with.
We are effectively magpies, and you can't force people to change their ways without them having the self motivation to do so. Hence my comment about fatties, or even smokers. You can have all the education in the world, but it's irrelevant without the individual making the effort themselves.
They want to live beyond their own means at a cost that others pay. As to housing, so to climate and pollution.
Unfortunately, you are right. People are generally very short-sighted and concerned with only their personal situations, especially when it comes to the climate emergency. Most outright just have no idea of what the implications are, should we carry on on this current trajectory. There needs to be a global effort and yes there will be collateral damage and a tough transition for 10 years or so, but there is literally no alternative.
If there was a "we'll stop doing all the bad stuff to the planet and each other but most of you will get a 70% drop in lifestyle" party, pretty sure it'd never get in. - strawman start to the year Panter
Explain how.
Because if you think we can have all this *waves hands around at modern life* whilst also meeting all our climate and societal aspirations, I have some magic beans to sell you.
The divide is huge, as are the costs. So it won't happen, because in all reality people won't want to wear the costs. Unless it's at gunpoint.
Most likely though, people will be motivated once its so bleedingly obvious it's too late.
re ... "The voting public generally want things as cheap as possible."
That's why some people buy inexpensive cars and some people by expensive ones, right?
The new opposition are unhappy with the new government's moves. Not a surprise.
The "new opposition" includes the MSM
No, the MSM buys into the same bull---t.
Economic growth forever (just shifting who benefits, slightly); money is a store of value.
Both are falsehoods; the former is impossible, the latter is a forward bet; works until it doesn't.
Totally agree. I don't turn tv on these days, unless I'm streaming something.
It'd be good for the new government to figure out honestly if they have or haven't been paid by Tobacco to change laws to benefit them, for one...
Article on stuff this morning re restrictions on KS...Commerce Minister Andrew Bayly "“If members are looking for more flexible forms of investment that may allow them to withdraw funds more easily, there are alternative products available (e.g. non-KiwiSaver managed investment funds, term deposits and PIE funds). These products may be more suitable for investments over shorter and medium terms than KiwiSaver, which is designed specifically for retirement saving."
Obviously not promoting KS now and telling people to save elsewhere? Most people Andrew can't do KS and other forms of investment which was the whole purpose of the article (its pumped into people if you are to save then do it in KS) . Also the other argument is ignored that mortgage has compound interest if not paid, much like the investment of KS side, so I agree that KS should be able to be used to pay down house debt only.
Yes I read the article too and was a little nonplussed by the attitude of the KS people. after all KS is about saving for retirement, but if a mortgage is making it harder to do that then surely the best option is to pay off the mortgage? The banks are private business's and essentially predatory, but KS should be flexible about how to support people into retirement. Being able to get rid of a mortgage before retiring is surely a no-brainer?
Saving for retirement?
Sigh.
Proxy-betting that there will be resources and energy available during their later years (even retirement is a misnomer), is the accurate description. And the codicil is: if others aren't out-competing.
Forward bets on real stuff being available in the future, laid on nothing more than Bookies stubs.
Yes, getting rid of the mortgage is a no-brainer - but the system these clowns represent, wants folk to stay attached to the umbilical. And kept believing...
Paint it anyway you like PDK but it is saving for retirement. I don't think there has ever been an era when people too old to work have not needed resources to survive when they retire. But most retirees go into a mode where their energy consumption drops significantly. In part driven simply by the level of resources they have available. It is a forward bet, but the Government is simply not reigning in the predatory practices of financial institutions that bleed their customers at every turn. So not only is it a forward bet, but it is also accompanied by a level of prayer that it will be sufficient to provide at least a modicum over the pension.
But you are right - the systems itself (but is really just people making decisions about others with little accountability) seem directed to keep people down.
"retirement" is a social phenomenon that's only around a century or two old. In most eras, people died younger, or were active in the community till their body gave out totally.
It's actually a key social change humanity has never really had to contest with, so the current peril caused by longer lives and less children is somewhat uncharted territory. Doesn't look great.
"most retirees go into a mode where their energy consumption drops significantly" - didn't look that way last time I was on a flight...
Pretty sure that if 'most' were on that flight, the plane would have to be a hell of a lot bigger. You were probably just seeing a very small percentage of the top 1%.
I get the implied sarcasm, but no matter how it is laid out, there will always be plenty who have the resources to do that. But in NZ there is no way they will be the majority.
"energy consumption drops significantly"
Interesting take, from what I have seen the energy consumed goes through the roof as people age. Do not underestimate how much energy is expended on extending/improving life as one gets older.
.
yeah I think one is confusing it with household energy usage. I don't consume less than I did, however without kids to raise and run around after it might look like I do.
But compared to many boomers...grey nomads, cafe's every second day, overseas trips, new ev's and the medical demands I'd say many are using more energy than they ever did.
I don't think there is any doubt that many people are going into retirement with plenty of money to provide a decent living standard. But the question is what percentage of the population are they. I know a few who are like that, but I also know many more who are just scraping by, barely surviving. Struggling to pay bills, and especially worried about medical costs as they age.
40% have super as their only income. Tragic life that if they rent.
And that is on the increase.
This is a slippery slope towards the entirety of Kiwi retirement savings ending up in the housing market. Our savings are pathetic enough already.
+1 Exactly.
Property stands as a safe haven investment largely because the history of alternatives, shares and other equities, are riddled with failures and loss. JBL, Securitibank, Broadbank, RSL, Feltex, Fortex, just to name a few. And let’s not mention all those finance company debentures in 2008. Recall Finance Minister Cullen wishing NZrs would invest in equities rather than property and only days later the Telecom share price was gutted, a cornerstone investment for every mum and dad investor.
If you look at an old newspaper share market board from 30 years ago, virtually nothing from that era exists now. Some have gone under, the good ones all swallowed up by foreigners. Investing in anything other than property in NZ is a disaster, although bank term deposits only eat your capital at a slower rate, rather than disappearing it altogether.
Not many have gone under. Most that aren't there have been taken over and when that happens it's no disaster as you usually get bought out at a premium, then you just reinvest the money in new opportunities. I'm sick of Kiwi's saying property is the only way - it's why we are in this mess.
I'm predicting a birth rate fall to 1.55 for last year. We'll find out in a couple of weeks.
I'm predicting a birth rate fall to 1.55
I think a more immediate effect of poor economic outcomes due to our housing obsession is the soaring emigration rates among young Kiwis and long-term migrants.
Speaking from my experience, simply stamping more visas to replace the loss of local skills in the broader infrastructure sector has been a colossal policy failure. On the contrary, the added demand is putting upward pressure on wages, while productivity is seriously stalling due to lack of workers across the board.
"Not many have gone under."
A lot have gone under.
"no disaster as you usually get bought out at a premium"
Many have destroyed shareholder weath and been sold at a "market premium" on the day at a loss to many shareholders! Good ones have been sold off for a quick buck by your average short termist institutional investor. The board looks pretty bare of any opportunies now. When was the last real company that listed?
Quality NZ companies tend to list on the ASX now rather than the NZX. More liquidity, more access to capital, possibly cheaper to list? Not sure on that last one.
The combination of monopoly behaviour by the NZX and the lack of interest in stocks from Kiwis have combined to push activity overseas. It is actually cheaper in some situations for me to buy ASX shares compared to NZX. Sharesies for example cap fees at $25 NZD for NZX purchases, $15 AUD for ASX and $5 USD for US shares.
That's right and its getting worse. NZers don't want to invest in shares because of the 1987 crash. Which is kind of like saying "When I was 20, I had a car accident, so I will never drive again". Actually its just an excuse for justifying property specuvesting.
It's crazy - a whole society that thinks the way to get rich is by doing the same thing as everyone else and jumping into a crowded trade. Low yield, high price, low liquidity, difficult to fractionalise - the only thing going for it is easy leverage.
Meanwhile the rest of us watch in confusion as society ploughs all its capital into making the cost of living higher, rather than investing productively to make it cheaper.
Exactly! I was hoping this time round for a real property crash, but its become such a part of our investing culture, that the last lot was thrown out and we put in a declared property investor who knew he could get in by promising to reverse all the rules to support more idiotic investment in the future.
Yay! Lets all live in a country where its horrendously expensive, with no economy but housing, some farming and tourism, sounds wonderfully short sighted.
Disagree blobbles, the NZX and global markets have been in bubble territory as much as the property market.
"from 30 years ago, virtually nothing from that era exists now" - you could say that about houses in Auckland in many suburbs...
Exactly why index fund investing is the best way for regular people to invest in equities. The S&P/NZX 50 Index has an annualised return of around 10% since its inception a little over 20 years ago, for example, which is a very solid return well above inflation over the period. Not that I'd put all my money in the NZX50 by any means, but it's well worth a portion of your portfolio given the tax advantages of investing in NZ equities over international ones IMO.
The S&P/NZX 50 Index has an annualised return of around 10% since its inception a little over 20 years ago, for example, which is a very solid return well above inflation over the period.
Hmmm. You cannot invest in the S&P/NZX 50 Index as a product, except for Smartshares.
Over the past 10 years, gold has outperformed the NZX50.
Just buy an index fund and you never even need to know the names of the companies you own. A few will fail and will knock an insignificant decimal place off your net worth. Others will grow magnificently and more than make up for the failures.
Yes, NZ politicians have not been very effective at persuading Kiwis there is a world beyond property - introducing the FiF regime on foreign stocks is another classic example. For those not in the know - this is a wealth tax that narrowly applies to non-NZ/Australian shares, regardless of the income they provide.
The one silver lining is the imputation regime is quite rare and valuable, to avoid share holders paying tax on dividend income that has already attracted company tax.
It's more of an asset tax than a wealth tax. I don't think you can offset loans against the value of shares when calculating the tax to pay (e.g. stockbroker margin loans, etc.), so they're taxing you on the asset value.
Fair point - it's a little more punishing than my characterisation. I don't actually pay it myself yet although some of my funds will be paying it on my behalf - most of my direct investments are in the NZX and ASX to avoid the hassle of FiF.
Stock picking is more or less throwing darts at a dart board - if you'd followed the advice of people like Buffet or Bogle and bought a broad market index fund in 2008 you'd have made fantastic gains - even accounting for one of the biggest recessions of all time happening in between. An investment in the SP500 with dividends reinvested returned 10.2% p.a. since the beginning of 2008. Even accounting for the drag of FIF tax that's a fantastic return. Even the NZX50 has nearly trebled since 2008. If you'd been the luckiest investor of all time and perfectly timed the bottom of the SP500 in March 2009 you'd have a return of over 700%.
Leveraged house speculation has of course had a better return over that time, but leveraging has risks of its own and diversification away from a single asset class is still sensible if you ask me.
I guess but they let 1st home buyers use a portion there KS funds don't they, so money going into property. So why not let those who struggling to pay debt on a property use a portion to pay that debt. Its both going into a property.
"You may be eligible to withdraw KiwiSaver savings early if you are experiencing financial hardship."
https://www.ird.govt.nz/kiwisaver/kiwisaver-individuals/getting-my-kiwi…
If you have already bough a place and interest rates go up beyond what you were thinking: I think if you could use kiwisaver in this instance then that would be optimal for that person. Or if you needed money now for an operation.
However the problem is where do you draw the line????
In Oz they allowed withdrawals during covid. Was this a good thing? Who knows.
I took out the maximum they allowed from my Aussie super during covid. I didn't need it though reinvested it somewhere I think. People will raid their super if you give them the opportunity.
Yes, the problem is we're already part way down the slippery slope and it'll be very hard to clamber back to the top.
It certainly was a disaster when John Key's government ramraided the country's KiwiSaver retirement scheme to subsidise higher property prices. Just emblematic of the greed and entitlement that has infected the country in the form of property speculation and MPs up to their neck in it while steering policy.
Benchmark bond yields have sunk in anticipation of those meeting details.
The demand for safety and liquidity offered by US Treasury debt is insatiable.
Is The Government Debt Confirming a Crisis
You won't believe how much debt our broke government issued last year. MULTIPLE trillions. At the same time, the Federal Reserve did three-quarters of a trillion USTs roll off its balance sheet (QT). Rather than destroy the Treasury market or bonds in general, quite the opposite has happened. You NEED to ask yourself WHY. There is no soft landing here.
The world has been living in permanant economic crisis for as long as I can remember. It's sooo passe to be bothered by it. Perhaps the perma "crisis" is designed to suck all the oxygen out of the actual crisis?
Biosphere collapse.
Phew good thing the RBNZ confirmed NZ rates would not fall, even though the rest of the world is.
We're special.
The rest of which world.
Indonesia 6%
Saudi Arabia 6%
India 6.5%
South Africa 8.25%
Mexico 11.25%
Brazil 11.75%
Russia 16%
Turkey 45%
Argentina 100%
Come on! We need to drop rates and pump the property mega bubble as quickly as possible!
The rates are funding everything though, general lifestyles and businesses, that sort of thing.
Funding is a word we need to challenge.
The only underwrite is energy - come on...
That misconception was perhaps our prime mistake; that money (keystroke-issued debt) could somehow always conjure up real stuff. Worked until it couldn't.
For the purposes of a coherent discussion, money is the primary means for a commercial transaction.
But yes there's definitely a case to question what and how money is being used, and it's actual relevance to the human experience.
I suspect you're getting too tied up in semantics PDK. Yes money, in what ever form coins, notes, 1s and 0s, bitcoins, is not a real resource. But it represents resources, and the more you have, means the more resources you can control (ignoring inflation, scarcity etc). So to all intents for most people money IS a resource.
In an everyday basis though the evidence that it is not is ever present - the price of fuel for example, as more money only buys less resources. But at the moment the politicians and the MSM are still in denial and working hard to keep the resources, the real ones, sort of affordable for the masses because if they don't.....well that sort of leads to things like revolutions. And guillotines tend to scare the crap out of politicians!
Are those the countries we usually compare ourselves to economically? Didn't think so..
We must be a few months now from the big pivot on rates. My money is on April in NZ but RBNZ will almost certainly hold out until the Fed drops; they have been preparing to defend the NZD just in case they do have to drop first, but they won't want to do that. The price for waiting is only a few thousand more people chucked on the dole, more businesses hitting the wall, another few months of not building the houses we need. Who cares?
I hope that over time, RBNZ and the NZ economists with influence think deeply about why the NZ economy barrelled deeper into recession during 2023 and 2024 while inflation remained elevated. I hope they consider why inflation melted away in other countries without reduced consumer demand, or increases in unemployment.
It is worth noting of course that some central banks tried to hit the brake, but when they pressed the pedal... nothing really happened. The transmission mechanism between the rate hike brake pedal and the economy relies on high levels of short-term fixed debt. Sadly, the UK, Sweden, NZ etc have plenty of that... so central banks got their wish. As for the transmission mechanism between reduced consumer demand and prices - the jury is out on whether that even exists. Anyway, down the toilet our economy goes - falling a few steps behind our supposed peers that we will never get back. The last time we punished ourselves so needlessly was Rogernomics, but that's another story.
Jfoe my bro. Don’t panic. Wasn’t so long ago NZ was the rock star economy of the world. The whole world! It’s a roller coaster operated by emotion and manipulation. We’ll be back there one day. Ride it out.
I don't get why the Fed would even consider lowering rates right now. AFAIK their economy is doing well and they have low unemployment.
There seems to be expectation that interest rates have to go back down to somewhere near 0, but those rates only made sense when we had a deflation problem. Maybe we will get that again, but at this point I would think the risk is the other way.
Yeah and they always had intentions to normalise the rates higher which they kept attempting to do even when inflation was super low.
What a surprise
Fed now hawkish says rates cut’s unlikely in March
What will the market do now
If you were looking down at the world from another planet and reading the news headlines
you wouldn’t have a clue what’s really happening
World on brink of world war 3
Oil prices fall
Interest rates to fall soon
Fed says rate cuts not on table any time soon
Banks are all in sound financial position
Bank declares big loss, bank shares fall
How can us poor mortals understand what is really going on
“This planet has - or rather had - a problem, which was this: most of the people living on it were unhappy for pretty much of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movement of small green pieces of paper, which was odd because on the whole it wasn't the small green pieces of paper that were unhappy.”
― Douglas Adams, The Hitchhiker's Guide to the Galaxy
Lol...the best (behavioural) economics tome ever written...shame about the movie
Central bank's have what they consider a neutral OCR, above which it is contractionary on the economy. I think in NZ it is around 3% OCR. So if inflation is under control and the economy is doing well, then the OCR (or Fed rate) should drops towards the neutral level. At least that's how I understand it. I don't think anyone expects a sub 1% OCR any time soon
Almost right.
The 'neutral rate' is where the central bank believes they are no longer 'making the market' and market forces have taken back control of pricing ... and ... the central bank doesn't see inflation looming (or the economy going down the toilet or liquidity has evaporated due to fear) with the market back in control.
It's pretty much indicative. And some would call it wild speculation. ;-)
re ... "... RBNZ will almost certainly hold out until the Fed drops; they have been preparing to defend the NZD just in case they do have to drop first, but they won't want to do that."
You sure about that? My guess is that there will be FX specialists chaps within the RBNZ that want to do exactly that. I.e. Drop a couple of weeks or a month before the Fed does. (The charge of 'market manipulation' can't be used against central banks as that is their raison d'etre. Would an insider trading charge fly? Nope. The writing in already on the wall that rates are coming down. Of course, with all this information in plain sight the FX chaps may not make the killing they would if it came as a complete surprise.)
Fair points. Interesting that RBNZ did tens of billions of dollars of FX swaps in January and then Paul Conway did a speech this week that materially impacted the value of the NZD!!
"Comeuppance" is an interesting way to describe Elon Musks situation.
I find it interesting how it was it was portrayed as a pipe dream but now that he achieved the goals and in turn generated a huge amount of value for shareholders, and been paid, a tiny number of shareholders have taken issue. One can argue about the percentages but would a performance based approach to compensation not result in better outcomes in general in the corporate world rather than back scratching bonuses even when things are turning pear shaped?
Westpac probably made a hundred million on their dodgy swaps and only had to pay a 10% tax? That's great ROI.
Those fines are pathetic, they should set them at the tax rate of the whole value of the transaction. A $500m fine might have made them sit up and take notice, otherwise its just the cost of doing business.
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