The Reserve Bank should hike the Official Cash Rate on September 15 and would need to find a good reason not to do so, National Bank chief economist Cameron Bagrie says.
Talking to interest.co.nz after the release of the National Bank’s Business Outlook survey, which showed firming confidence in July, Bagrie said the main reason which would stop Reserve Bank governor Alan Bollard from hiking in September would be harder evidence of global economic fragility.
“If I look at the collection of what [data] we’ve been seeing, particularly locally over the past four weeks, I’m veering towards September," Bagrie said.
"In fact now, I think the Reserve Bank needs a reason not to go in September as opposed to a reason to go, and the issue is whether there’s going to be enough hard evidence of the global fragility – whether the risks there become reality – to stop them raising rates in September," he said.
"That’s a risk, but I don’t like taking a core forecast based on a risk. We go with what we know, and what we know is, the OCR at 2.5% just feels too low."
“Subject to things not going to hell in a hand-basket, the Reserve Bank I think is going to have no choice but to raise the Official Cash Rate in September.”
More soon.
13 Comments
What Mr Bollard should do is drop the OCR by 25 points to burn the fingers of the currency speculators. We may feel the pain later on but it would be bearable just for the joy of seeing economists and speculators confounded, not to mention have the heat taken out of the currency. However Mr Bollard does not appear to have a mischievous sense of humor that would prompt him to take such an action
Sept will be too late...in fact he is already late...the beast is out and free...as a result of the Bernanke dictate near zirp policy, Alan Bollard will be forced to go higher to catch the beast.
The Chch rebuild numbers will show a cost push as all involved move to grab what they can.
Bernard says December, I'd been picking October for a while.
However due to the sensitivities around a hike (pple in chch, nz$), I'm starting to reckon he'll do it at an MPS, where there is a press conference - he can use that to talk $ down, reassure people there won't be any huge hikes.
So that means September (which would have to be a 25 bps hike), or December, which, if he waits til then is likely to be a 50 bps hike IMO.
So maybe 25bps in each of Sept and Dec...?
He def won't do it tomorrow - it would be silly making any moves before August 2, and even then, we don't know how long the US debt impasse will last.
Summer's also ending in Europe soon....
6% inflation, it should be going up 50 points next time, but we've gone into a new phase of deciding it's ok to destroy peoples savings, and earnings, while allowing property investors to inflate away their debts, and the amazing thing is they still think they're hard done by.
No wonder this economy is going down the toilet, and no one wants to save money, Greece and Ireland here we come, seeya soon.
I don't really, but I'd just love to see inflation get away on some of these "keep rates lower forever" people (the Beatty's of this world) such that they understand that elevated or rampant inflation, when wages grow is restricted, is a far worse evil than what we're experiencing currently. I see Australia had another higher than expected inflation number today, to match ours last week. Look at the inflation rates, and ongoing direction of such inflation rates, throughout the world at the moment.
Despite what central bankers and economists keep saying about it being temporary, they just keep being wrong. I guess this is one of the rare examples when the "keep rates lower forever" people will be saying that the economists know what they're talking about - funny what drives people's thinking/perceptions isn't it.
We've already got major problems, most people would say inflation of 6% is a major problem.
oh that's right though savers don't matter in this country, we only look after borrowers, and that's why we are one of the most indebted countries in the world, surprise surprise.
Where abouts does Cameron Bagrie work? LOL
No one is keen to borrow, thats why banks are trying to create this urgency.
"Hurry, interest rates are going up, borrow now and secure the low rates while you can!!"
Of course, in a month or two time after tricking people into borrowing on those fix rates, they will come back and say "oops, the inflation actually isn't as high as we thought, sorry..."
And why aint they talking up the term deposit rate?? hmm..
Interesting that the the number of mortgages issued last week was stable, but the value was significantly lower, giving a big drop in average loan size.
I wonder if people are holding off until they know how the American and European debt crises work out. Or whether now see the prospect of higher interest rates and have stopped borrowing...
Here's the stats.
http://www.interest.co.nz/charts/real-estate/mortgage-approvals
cheers
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