RBNZ holds OCR; forecasts 90 day bill rate unchanged at 3.7% until 2017; says strong downward correction needed for NZ$

RBNZ holds OCR; forecasts 90 day bill rate unchanged at 3.7% until 2017; says strong downward correction needed for NZ$

By Bernard Hickey

The Reserve Bank of New Zealand has completely removed any suggestion of higher interest rates in its March Quarter Monetary Policy Statement, forecasting the 90 day bill rate would remain unchanged at 3.7% until March 2017.

The contrasts with its December forecast that the 90 day rate would rise to 4.5% by the end of 2017.

The Reserve Bank left its Official Cash Rate on hold at 3.5% as expected and repeated its January 29 comment that future interest rate adjustments, "either up or down", would depend on the emerging flow of data.

The Reserve Bank also forecast that annual CPI inflation would fall in the March quarter to 0.0% and remain below the bottom of the Reserve Bank's target range of 1-3% until March 2016. That means annual CPI inflation will have been below 1% for five quarters and annual inflation will have been below the Governor's 2% mid-point target from December 2011 until at least the end of 2017.

Reserve Bank Governor Graeme Wheeler defended the bank's performance in meeting its Policy Targets Agreement, saying the bank still saw inflation over the medium term being consistent with that 2% target and that the bank could not offset the short term shock of lower oil prices.

Meanwhile, Wheeler said the domestic economy remained strong with lower petrol prices increasing purchasing power and lowering the cost of doing business.  Employment and construction activity was strong and net migration remained high.

"The housing market is showing signs of picking up, particularly in Auckland," Wheeler said. The bank made no further comment in its MPS about its proposal to increase capital requirements for rental property mortgages.

The bank forecast annual house price inflation nationally would increase to 8% by the September quarter from 6.5% in the three months to January.

Tougher NZ$ warning

"However, there are a number of factors weighing on domestic growth, including drought conditions in parts of the country, fiscal consolidation, reduced dairy incomes, and the high exchange rate," Wheeler said.

He then toughened the bank's warning about a high New Zealand dollar, saying a big fall was needed to make New Zealand's external accounts more sustainable. This was stronger than his warning in January that he expected significant depreciation.

"On a trade-weighted basis, the New Zealand dollar remains unjustifiably high and unsustainable in terms of New Zealand’s long-term economic fundamentals.  A substantial downward correction in the real exchange rate is needed to put New Zealand’s external accounts on a more sustainable footing," Wheeler said.

However, currency markets reacted to the statement with disappointment that it wasn't more dovish, pushing the New Zealand dollar up almost one cent to 72.8 USc.

Rates could be cut if inflation expectations fall further

Elsewhere, the bank included a discussion about a fall in inflation expectations and scenario that they fell further, which "would warrant more supportive monetary policy."

"Inflation expectations appear to have fallen recently, and we will be closely monitoring the impact of this trend on wage and price setting behaviour, especially in the non-traded sector," Wheeler said.

"Monetary policy remains focused on ensuring inflation settles at 2 percent over the medium term.  As the economy expands, inflation returns gradually towards the midpoint of the target range," he said.

"Our central projection is consistent with a period of stability in the OCR.  However, future interest rate adjustments, either up or down, will depend on the emerging flow of economic data."


ASB Chief Economist Nick Tuffley said he saw a 25% chance of OCR cut, although the Reserve Bank was now comfortably on hold.

The RBNZ is keeping a watchful eye on inflation expectations (one potential catalyst for an OCR cut), though acknowledges that expectations are correlated to inflation and could fall further in the near term.  The RBNZ’s focus on this risk was illustrated in a scenario: a fall in inflation expectations to around 1% that was sustained would be worth around 50bp off interest rates.  The NZD, another potential cut trigger, did not seem to attract heightened concern as yet.  These factors, as well as the potential for growth to undershoot the RBNZ’s outlook or for global risks to become more serious, mean the risks to the OCR remain skewed down.

We continue to expect the RBNZ to be on hold for the foreseeable future i.e. over 2015 and 2016, and the RBNZ’s statement today is very consistent with that view.  We put around a 25% chance on the RBNZ cutting the OCR over the next 6 months, but a lower OCR does need growth/inflation events to come in weaker than the RBNZ has built into its central outlook.  Key ones to watch will be inflation expectations, potential for the NZD to exceed the RBNZ’s (already-high) outlook, and material weakness in the growth outlook compared to the RBNZ’s robust outlook.

ANZ Chief Economist Cameron Bagrie described the statement as neutral, but noted that was not enough for currency markets expecting more of a dovish tone.

As widely expected, the Reserve Bank left the OCR on hold at 3.50%. The tone of the statement was neutral (next move for rates being “up or down”), although with a hint of a softer bias by including a rate cut scenario. However, the economic spirit is still upbeat. 

Despite the clear neutral tone, the currency response to today’s decision and commentary (up) is telling. The market obviously needed a lot from the RBNZ to validate recent weakness.  The RBNZ went further than we expected by including a rate cut scenario. But that is being looked through – it’s not enough for the market. Comments relating to the economy being “strong” are telling. Strong economies do not tend to experience currency weakness on a broad TWI basis. The RBNZ may have truncated their 90-day projections so a flat profile is shown, but the nuances in the forecasts were obvious: if their central scenario prevails rates will eventually move up, albeit that this is a long way off.

Like the RBNZ, our base case is that we are in for a considerable period of unchanged OCR settings (with an eventual resumption of hikes – but not for a very long time). We can envisage a rate cut scenario but the hurdle remains high. However, the market will continue to test a rate cut thesis for another 6 months.

BNZ head of reasearch Stephen Toplis

There is absolutely no reason to lower interest rates while the economy remains so robust and pressures remain on the housing market. There is absolutely no reason to raise rates when there is no inflation. The hurdle to shift rates, in either direction, is now very high such that the Bank will probably have to be convinced that it needs to move rates 50 basis points before it makes its first move.
Given that such convincing will take some time, any move will also be later rather than sooner.
Our own forecasts will continue to contain a tightening bias but we have removed the March 2016 hike that we had penciled in altogether. That being so the first rate increase we have is June 2016, with the cash rate then rising to a peak of 4.0% a quarter later. That said, we concede there is now more chance of a rate cut in the next twelve months than a hike. A chance made all the greater by today’s currency response to the RBNZ statement. The NZD has climbed from a TWI of around 76.50 prior to the statement’s release to a current level of 77.35.
The Bank goes so far as to say that if “inflation expectations settle near 1 percent over the coming year” then the cash rate might be as much as 50 basis points lower than its central projection. We believe this degree of specificity is unwise in this instance. It is almost certain that inflation expectations will keep falling because expectations are heavily influenced by published inflation which will decline to near zero, on an annual basis, right through calendar 2015.
Interest rate neutrality remains an open argument and the RBNZ, while sticking to its story that the neutral 90 day bank bill rate is around 4.5%, concedes that it is continuing to look at this assumption closely with a view to potentially lowering it.

Westpac Chief Economist Dominick Stephens:

Today’s statement will have disappointed the sizeable portion of the market that is clamouring for interest rate cuts. Hence the subsequent market reaction: although interest rates were little changed, the NZ dollar initially spiked a cent higher after the statement. That will hardly please the RBNZ, given that today’s statement if anything escalated the language around the strength of the exchange rate. However, we suspect the move reflects a clean-out of speculative positions rather than a change in the market’s view on the currency. The RBNZ’s overall assessment was similar to the one made in the January OCR review and Governor Wheeler’s follow-up speech in January.

The RBNZ is still uncomfortable with the strength of the exchange rate – while the NZ dollar has fallen quite a bit against the US dollar, it remains at a very high level in trade-weighted terms. If anything, the language in today’s statement escalated those concerns: the January statement noted that a further significant depreciation was “expected”, today’s statement said that it was “needed” in order to rebalance New Zealand’s external accounts.

The chief risk of the RBNZ’s mind surrounds inflation expectations. The MPS contained an alternative scenario in which recent falls in oil prices affect wage- and price-setting behaviour to a greater degree than expected, and inflation expectations fall from their current level of around 2% to 1%. In this case, the RBNZ indicated it would cut the OCR by around 50 basis points. While this is a plausible scenario, it would take a long time to play out; we don’t think it offers any encouragement to those betting on interest rate cuts in the near future.

(Updated with currency, economist reaction, chart).

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?

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Your headline suggests that the current OCR rate will be 'no change' for a year or more.
The RBNZ statement does not have anything in it to confirm such a comment.
The RBNZ says rates could go up or down,
I do like Bernard's inference  about the exchange rate
He then toughened the bank's warning about a high New Zealand dollar, saying a big fall was needed to make New Zealand's external accounts more sustainable. This was stronger than his warning in January that he expected significant depreciation.

The RBNZ forecast short term rates unchanged until 2017. That's their proxy for the OCR.

Not disagreeing but an implied straight line is not a wobbly line given the statement that suggests the slope may change to up or down. Obviously Wheeler likes straight line and preferably ones that avoid a slope.
Boredom is setting in unlike under Carney who at least is preparing to act.

Is he? Carney is the one who said overnight that to cut rates would be 'extremely foolish'.

The Reserve Bank of New Zealand has completely removed any suggestion of higher interest rates in its March Quarter Monetary Policy Statement, forecasting the 90 day bill rate would remain unchanged at 3.7% until March 2017.
The contrasts with its December forecast that the 90 day rate would rise to 4.5% by the end of 2017.
What a fickle, less credible bunch this lot has turned out to be - I await the next change of course with little or no anticipation. The bond market is more timely and does a better job despite a lack of liquidity.
It’s taking less and less these days to make the $12.5 trillion U.S. Treasury market jump.
And it’s been jumping a lot lately: The bonds gained 2.9 percent in January, then plunged 1.7 percent the following month, according to Bank of America Merrill Lynch’s U.S. Treasury index. That 4.6 percentage-point swing in returns was the biggest to start any year since at least 1978. Read more
Nonetheless, the CB brotherhood, in the form of the BoE governor, stepped up in defence of no OCR change.
Bank of England Governor Mark Carney said on Tuesday it would be "extremely foolish" to use more monetary stimulus to fight a temporary plunge in British inflation caused by declining oil prices. Read more

The RBNZ does indeed seem to have a credibility issue.
It has used its strongest language yet in terms of the exchange rate, and yet the NZD appears to have jumped the better part of a cent on their statement. 
You sense that the RBNZ inflation expectations are now optimistic guesses, and somewhat dependent on the NZD depreciating, something, in a Catch 22 situation, it is unlikely to do unless the RBNZ either drop rates or print and buy foreign assets. Wheeler seems to think it should just decline because he says so, and that its not remotely his fault if it doesn't. Naughty exchange rate.
Even with its own guesses, as the article notes, inflation does not seem to be getting anywhere near the average of 2% in this "cycle", unless you conveniently extend the "cycle" many years out. And yet John Key has reminded everyone that 2% inflation is really their prime target. The Central Bankers club's rhetoric (but not their actions in the case of many of the other CBs) does seem to have influenced Mr Wheeler.

Bang on.
You really do get the feeling that if we were tracking above the targeted inflation band, that the OCR would be rising, big time!! 
So if the OCR has little effect on the bankers profit margins and the exchange rate is higher than beneficial....
What are we missing??

Anyone who cannot see  that DEFLATION is  firmly entrenched in the developed world is delusional .
What more evidence do we need than the massive money printing to stimulate demand and stimlute spending ?
So why does the RBNZ not see this ?
There is an under-utilisation of Industrial capacity everywhere in the developed world , and oversupply of almsot everything imaginable  ..........including an oversupply of  labour , oil , power (electricity and gas ) ,  manufactures , clothing , food , electronics and everything else .

When uneployment rises and wages decrease, it is time to be concerned about deflation.

Exactly. The angst about 'deflation' is quite misplaced. It is not the deflation of old or textbooks. It is just low inflation or 'negative inflation'. Inflation impulse is still there and will reveal iteself when the sudden drop in oil prices works it way through. If oil stays low, in a year or so the core inflation will reveal itself. If the oil price rises, the revealing will be sooner.
Low prices due to technological change means the game has changed, which is why judgments today can't be made on the same basis as previously (ie history or the textbooks are no longer relevant). Low or negative prices due to tech just means we are not measuring things properly, a bit like focusing on 'liabilities' without looking at 'assets'.
"Past performance is no guide to future returns" and all that.

Part of the concern of deflation is that people hold off on making purchases expecting things to be cheaper in the future and cause a slowdown/recession. There will be some of this but I think it is overstated. TV's have been falling in price for years and people still buy them. 

Boatman ...I must be delusional...... totally..
What I see are deflationary forces..... the result of deleveraging. ... I dont see entrenched deflation....    (The world still has growth.)
AND...  What I also see are the 2 most powerful economic forces on the planet... ( Central Banks and Govts.).....     in total abandon , in regards to fiscal and Monetary perogatives... doing everything they can to stop the world falling into deflation...  ( It is a big experiment).
You do not have massive asset Booms during a  deflationary period...   ( examples are the great depression and Japan).
Of course... thats my view .... longer term , I see inflation as the issue...  ( China as an example ).....  and we do invest based on our own views..
The deflation and high unemployment in the Southern countries of the EU.... have been partly because of the Austerity measures imposed by the EU itself.... 

Deflationary forces, yes.
Entrenched deflation, no not yet.
Cbs well they seem to be doing a bit, not so sure on Govns, in fact they almost seem to be counter-productive, ie austerity.
Asset booms with deflation, no I agree here that is still to come.
Long term view, well after the deflation bout has occured and assets today are worth 75% or less then OK some inflation might happen. But really that is not much help if your asset is down 75% and you get 5 or 10% infaltion for a year or 2 and then more deflation and you still owe the orginal value and your wages is also slashed significantly.
Bear in mind the GD only lasted  5 or 6 years before the arms build up to WW2 and they had copious energy available.  today we are on a energy decline, ergo I cant see GDP to do anything but shrink for decades until 2050.  Look at inflation pre the industrial revolution (and coal and oil use), it happened but then periods of deflation negated that "gain"
I guess what I am saying is the 200 year excess energy experiment is ending and we will revert to norm living in teh Sun's annual output.  What we will have is a damaged and expoilted planet now unable to support the numbers we now have. So the answer? well denial or telling me to pray....yeah right.

Roelof , you may be right or I may be totally wrong , but there is practically  ZERO growth in Western Eurpoe ( 22% of world GDP ) and  Japan ( Worlds 4 th biggest economy ).
We are , in reality , clueless about whats going on in China ( 12% of world GDP)  but there is evidence of slowing commodity imports implying either inventory oversupply or depressed demand
Asset price increases in equities and other passive assets in the developed world  are just the QE  trlillions looking for a yIeld  above Zero .
The US is still , no matter what the naysayers think or wish for , the most resilient and agile and flexible big economy on earth . ( The US is 23% of total  world GDP  and 80% of new Tech development by value and nearly  50% of all financial  services GDP, with China having got the manufactruing upper hand  )
Currencies are being pushed down and now in an anomoly German made MERCEDES CARS  and BMW's are now way cheaper  than equivalents  in the US.
I firmly beleive we are in the middle of a deflation and stagnation cycle in Europe , Japan , and possibly the US , and close to this in China .

"Asset price increases in equities and other passive assets in the developed world  are just the QE  trlillions looking for a yIeld  above Zero ."
Really? I thought QE was an accounting entry. Moving an entry from the FED securities account to the FED reserve account. Yip, sounds about right.

Maybe you could explain this direct variation of CB bank intervention which is not consistent with your theme.
Since 2010, The Bank of Japan has 'openly' - no conspiracy theory here - been a buyer of Japanese stock ETFs. Their bravado increased as the years passed and Abe pressured them from their independence to 'show' that his policies were working to the point that in September 2014, The BoJ bought a record amount of Japanese stock ETFs taking its holdings to over 1.5% of the entire market cap, surpassing Nippon Life as the largest individual holder of Japanese stocks. However, as WSJ reports, The BoJ has now gone full intervention-tard - buying Japanese stocks on 76% of the days when the market opened lower. Read more
And what regulatory control prohibits domestic US banks dipping into this ~$2.4 trillion dollar pool of free balances to put 3% margin money down to play the E-mini S&P futures market, other than mutual fear that each other's clearing checks cannot be trusted without  visible liquidity facilities earning 25bps on the taxpayer. Nonetheless, at least  one $trillion of the Fed's QE injections are lurking else where. 

Sorry SH, but ZeroHedge is not a credible source in my opinion. They're mostly a silly gold pumping site.
We were talking about US QE btw. There's no US $ lurking around anywhere. They're all there in the FEDs computer.
Edit 2:
Maybe make ones for interest.co.nz?

Onwards...    Can u elaborate..??   everything is an accounting entry.... thats how we "measure" and keep track...  BUT...  accounting is a derivative of an underlying reality.
If the FED expands its balance sheet, it means that it is buying assets and paying for them with money that it simply creates...
I know it is a play with words.... but in a way the FED is Monetizing the Govt debt..
If the recipient Banks choose to leave that money in their accts. with the FED ...( reserve accts).... then thats their business.... but it does not change the fact that the FED has created Money.
see chart.. Monetary base and reserves held at FED    
QE is only an accounting entry in the same way it would show if I electronically transferred money from my acct to your acct.     It would be wrong to simply call that an accting entry.

The FED is not creating money. It is converting bonds/securities (Think of this as the FEDs savings account)  to an entry in its reserve account (Think of this as the FEDS cheque account)  Thats it. Not once cent was created.
Roelof, here is a short video that can explain it for you. While I detest RT, the person being interviewed, Warren Mosler is a reliable source and someone with a good understand of MMT

onwards...  If that was the case there would be no increase in the FEDs balance sheet.
The FED creates the new money by Depositing "money" into the Reserve acct. of the Private Banks that have reserve  accts at the FED... 
They are Buying US treasuries from those private banks...  ( they cant buy them directly from the Govt..because that is illegal ).
That money is "real" ....  It is an asset of the private banks... and a liability of the FED.  Just because that money is held in an acct at the FED ..does not mean it does not exist.. A bank could write a check on it tormorrow ... if it wanted to.
Private bank reserves held at the FED are part of the "Monetary Base".... which is  called 'outside money"... or  "high powered " money...   whatever u call it...  it is money... and it has grown from almost 0 in 2008 to almost $3 trillion in 2008.
I have read Mosler and MMT....   and I dont treally subsrcibe to their views...   
AND... I'm no expert... so this is just my view..

I don't think it's that simple Onwards.  The Fed purchased government bonds, albeit through primary dealers, but at the end of the day the government bonds were converted to an asset on the fed's balance sheet.  That allowed the government to continue increasing the money supply by deficit spending.  The government may one day pay back the primary dealers who will pay back the fed in worthless dollars.  All that matters is that deficit spending in a given year = increasing the money supply for that year.
QE also involved the FED purchasing 40Billion / month of (toxic) mortgage backed securities from banks and shadow banks.  This flattens the yield curve allowing the banks to continue lending at lower rates for longer.  Lending by banks increases the money supply, as in aggregate demand = income + change in debt.  The banks may one day pay back the fed's mortgage backed securities in worthless dollars.  All that matters is increased mortgage lending in a given year = increasing the money supply for that year.
At least that's my humble understanding..

Not many news sources are credible any longer, the likes of Matt Drudge have a huge following, in the end we just have to sieve though masses of information and work out what makes sense or is  believable.
  I used to be a fan of the Telegraph but no so much anymore, I still respect the FT, the best thing about Zerohedge to my mind is that it often links to good reliable sources but much is dubious just lilke the MSM, the standard of the comments on Zerohedge is very poor which confuses me as it's almost as if the commentors are on the wrong site.
 The way we gather information is changing, online news is very competitive and not so revenue driven, sites like Zerohedge may morf into something better or be replaced, but for now its still worth a look daily.

Roelof, One major contributing factor to deflation is manufacturers lowering the price of their goods so that they don't lose market share. Just look at the Swiss trying to lower their prices to compensate for the rise in their currency. The Germans are doing too. Everyone is doing it. Same with the Saudi Arabia. All this talk of peak oil will cause inflation is laughable.
Inflation will only occur when the US government spends. This will get the world out of deflation.  Unfortunately the US is crippled by morons that think the US budget must be run like a balanced budget. Keep a close eye on the upcoming debt ceiling talks again and more importantly the upcoming  King vs. Burwell Obamacare supreme court case. This has the potential to remove plenty of money from the US economy.  If the US goes in to a balanced mode of budget, then expect real deflation to come a town near you. Worldwide.

Onwards....  Yes..  I agree..  thou in the scheme of things ... overcapacity does sort itself out.
"Inflation will only occur when the US government spends"   Yes and No....  As long as there is credit growth....  there is the potential for inflation..   The Private sector is borrowing in USA. 
I dont know anything about obamacare... will goggle it.
The chances of USA having a balanced budget ... are pretty slim... ??? Do u know something I dont..??   ... ( and if a balanced budget is offset by private sector borrowing ... it doesnt matter so much )
My own view is that the Policy responses of Central Banks and Govts....  will be more of the same.....  Until inflation hits us like a brick wall....  as an aggregate,  Central Banks will keep expanding their Balance sheets.....  and in Countries where they dont ( like NZ ) ..it is because the private sector and/or Govt is borrowing.... creating another credit growth induced business cycle....  yeha..
These are not solutions thou.....  so the future is very uncertain....  and I dont necessarily think it will be a future of deflation.....  my own view is that we are sowing the seeds of inflation... 

Good to see how effective Wheeler can be ---   substantial correction to the dollar acheived -  its jumped nearly 1% on the statement and comments!
If he is serious about lowering the Dollar he needs to cut  and cut properly -  even at 2% we would still be globally very attractive compared with most of the rest of the World -  we would still have lots of access to the wave of cheap money flooding the markets - so no shortage of capital for development / lending / fluidity.
A cut is hardly likely to stimulate the Auckland housing market any further than it already is - the driving factors are very different -  lack of supply, high immigration and would bring a little more relief to the rest of the country who could use the stimulus!
Or maybe join the rest of the world -  print 10 billion dollars - use it for infrastructure and massive R and D / Education programs  - at the same time as getting a nice 10% drop in the dollar!

Or maybe join the rest of the world -  print 10 billion dollars - use it for infrastructure and massive R and D / Education programs  - at the same time as getting a nice 10% drop in the dollar!
Any ideas how to implement such a scheme, given the exisiting intermediation infrastructure guarantees that banks are first recipients of the money value diluting process? As a rule banks tend to invest such bounty in non-productive liquid assets such as additional eligible CB collateral and stock index futures - such actions inevitably exacerbate deflationary outcomes via corporate mal-investment and mechanisms that under reward human labour.

Ask Raf Manji. He had great ideas about this a wee while back.

there have been a number of different options put forward for this -  and yes currently the central banks get first dibs and it appears everything is weighted in their favour - but supposedly to creat liquidty in the markets and allow the money to filter down eventually to generate spending and therfore growth and sme needed inflations from a consumer level.
To date - it is hard to see that this has had any real success - and has merely lined the pockets of the rich and financial institutions, and is definately not somethign i would or am advocating.
Central banks can only print with government permission and authority - so there is nothing to stop the Government from dictating how this shoudl be used -  one example could be instead of purchasign bonds and assets from various commercial sources -  the bank could be directed to purchase shares in future infrastructure - or a non perfroming asset  - after all we are not talking about making a profit for the central bank.
Example - the Bank purchse from the Government a 50% stake in a 2nd Harbour crossing for a billion dollars - and is rewarded by a % of any toll related profits over a 50 year period
Another Billion for research and development - a similar arrangment to build a state of the art large facility including access roading / Train/ airport  - and an annual operating budget for the management and core costs - that can afford to attract the worlds best as well as keep our great Kiwi Talent in new Zealand -  again  the return could be a small %of the patents and IP generated by the facilty over the next 20 years
Fact is - although both those suggestions have huge flaws - you cant tell me that we could not find a way to make these work  and others like it -  if we have the desire and imagination that has shone through our unique history.  Its not liek we have to worry about what hte rest of the world think -  as they print trillions! and its not like we can do any worse!
lets think big - and lets think 20 and 50 years down the line - create long term sustainable environmentally friendly projects that will deliver huge benifits  - higher paid jobs and better social and economic outcomes for all --- not just a plan ofr the next election and the weatlhy elite

SH, You are arguing with alchemists - hopeless - one day they will be the ruin of us all. And you are right to quote Mark Carney, as a Canadian who knows a real economy with resources, industry and trade when he sees it, he knows that that 'aint the UK.  EP

I just can't understand the preoccupation in this thread about inflation, disflation or deflation, it is no longer the major issue confronting central bankers. The real issue is the massive asset bubbles that they have created and are now being blown globally, including here in NZ in Akld property, and probably in farm land as well. QE is leaking out everywhere, hardly any into CPI inflation as is measured, but massively into financial assets where the real "inflation" is, and the risks surrounding that grow with each qtr/yr. They can no longer ignore it and its the only reason that the Fed for one is contemplating, and highly likely, to at least once, hike sometime in Q3. 
Also, I appreciate some here do, but the rest please understand what short covering is in the FX markets - when you're short a currency speculatively, and you suddenly realise you've got it wrong, you have to buy it back to close out - that pushes it higher in a one-off move. It was a classic example of it today and in no way suggests a trend from that one event alone, whatever happens from here

Rates won't go up as we pay about double what the rest of world pay for home loan interest rates, am very happy with the news and time for me to lever up a million

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