Here's my summary of the key news overnight in 90 seconds at 9 am. Bernard Hickey is in Wellington this morning, covering the RBNZ review of the OCR and their quarterly Monetary Policy Statement. He will be reporting in soon.
While no one now expects any OCR change this time, there is intense interest in how Alan Bollard is reading the euro-zone crisis and how he thinks it will affect New Zealand. Dr Bollard has a tough job making these assessments as the crisis in Europe, and the slowdowns in both China and the US are playing out even as he speaks.
In the US, retail sales declined in May, pulled down by a sharp drop in gas prices, which also drove down wholesale prices. Commodity prices are generally falling; analysts at Credit Suisse are predicting crude oil could fall to US$50/barrel - its is down to US$82/barrel this morning.
The driver in negative sentiment continues to be Europe. The prime ministers of Spain and Italy have called on European leaders for help. Prime Minister Mariano Rajoy of Spain has appealed to the ECB to buy debt from struggling countries like his, while Italy’s leader, Mario Monti, said Europe needed “credible” measures to promote growth. Cyprus is the latest to signal it will need EU help.
The head of the European Commission now says the EU is in a 'social emergency' - his plan to fix things is 'greater integration'. In campaigning, the Greek socialists say they can't lose because they think they can reject austerity, stay in the euro, and get bailed out. Greek deposit outflows are accellerating.
Frustration is growing from the rest of the world. Overnight the Australian treasurer pleaded for 'political courage' in Europe. Australians aren't in a positive mood at present.
All this piles the pressure on the RBNZ today. Yesterday, the Treasury said they expect the euro-crisis to grind on for a decade. Today we hear what our monetary policy experts think, and just perhaps get some signals about how they will respond. Bernard Hickey and Alex Tarrant will be reporting comprehensively throughout the day, starting at 9 o'clock.
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