About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds Other Sites:   depositrates.co.nz  |   landlords.co.nz
Last Article Uploaded: Wednesday, April 23rd, 5:01PM
rss
Investment News

Bank economists all over the place

Picking what the Reserve Bank will do with interest rates on Wednesday is anyone's guess, Rob Hosking writes.

Monday, August 13th 2001, 12:13AM

by Rob Hosking

"No surprises" has become something of a tenet of monetary policy over the past few years.

The regular six-weekly Official Cash Rate reviews are eagerly anticipated by banks, those of us with mortgages, and the small group of us who watch policy developments. Generally though, by the time Reserve Bank governor Don Brash makes his announcement it is usually pretty clear which way, if at all, interest rates are to move.

And while Dr Brash’s quarterly monetary policy statements (MPS) contain a welter of economic analysis and comment – and these can contain the odd surprise – this material is in the nature of what lawyers call obiter dicta - of much interest but not part of the main judgment.

The central bank is going to find it hard not to surprise some on Wednesday when it releases its latest monetary policy statement and official cash rate review.

It’s been a long while since the advice to Dr Brash from the economists on the sidelines has been so varied. Generally, this close to the release of the MPS, bank economists have reached a clear line of thought on which way any moves on the interest rate will go, even if there is often a powerful minority dissenting to the prevailing view.

This time the bank economists are all over the place. While business lobby groups are, as always, calling for Dr Brash to emulate his offshore counterparts and cut the official cash rate from its present 5.75% level to 5.5% or lower, the banks are divided.

The labour market data released in recent days would seem to suggest that inflationary pressures are rising, but as Bancorp economist Stuart Marshall has pointed out, the labour market is not tight compared to most of the countries we like to compare ourselves to.

"There is no inflationary scare here, and if the currency could be forgotten, the Reserve Bank would have no excuse for not taking a more aggressive easing stance.

"But the currency is still down; and the Reserve Bank will still be reticent."

Back in its last MPS, the bank was still bullish about the international situation, and this was expected to flow through to the New Zealand economy (or those parts of it not experiencing the export-led growth) towards the end of the year.

The latest consensus forecasts, however, show a drop in world growth.

They have yet to flow through to New Zealand businesses and the latest confidence surveys show the mood is more upbeat, and, collectively, businesses have a higher level of investment intentions over the coming year than they have had for some time.

As UBS Warburg economist Roger Clement has observed, the channels through which the global slowdown would normally impact the New Zealand economy are not operating as they normally would.

However that dip does come, it could be accompanied by a locally induced lag on economic growth – the drought.

Low rainfall has caused the southern hydro lakes to drop, and if these remain low the need to make further power savings is likely to cause a dent in the growth profile.

And if the drought continues it will also mean a lean spring for many farmers. The production lag from this will take a while to feed through to the figures, but it will come.

All this points to Dr Brash having a lot to say on Wednesday – but if you were a betting person, you’d take a punt on him leaving interest rates where they are.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

« Eriksen's Master Trust SurveyKing builds an empire »

Special Offers

Commenting is closed

 

print

Printable version  

print

Email to a friend

Good Returns Investment Centre is bought to you by:

Subscribe Now

Keep up to date with the latest investment news
Subscribe to our newsletter today

Edison Investment Research
  • Securities Trust of Scotland
    4 April 2014
    Large-cap equities, focused on dividend growth
    Securities Trust of Scotland (STS) is an investment trust that invests primarily in large-cap global equities targeting both income and capital growth....
  • Templeton Emerging Markets Investment Trust
    17 March 2014
    Emerging markets valuation opportunity
    Templeton Emerging Markets Investment Trust (TEMIT) aims to achieve long-term capital gains through investing in companies operating in emerging markets....
  • Worldwide Healthcare Trust
    13 March 2014
    Performing global healthcare investment trust
    Worldwide Healthcare Trust (WWH) provides a diversified but managed exposure to the global healthcare sector; the trust’s continuing overweight of...
  • Foreign & Colonial Investment Trust
    12 March 2014
    A quiet evolution
    Foreign & Colonial Investment Trust (FRCL) is the oldest UK investment trust and one of the largest and most liquid, with a market capitalisation of £2.2bn...
  • Henderson Global Trust
    10 March 2014
    Continuity of style, modest changes in emphasis
    After 32 years as lead manager of Henderson Global Trust (HGL), Brian O'Neill passed responsibility to Wouter Volckaert at the beginning of February. The...
  • Henderson Far East Income Limited
    13 February 2014
    Asian income fund with a growth emphasis
    Henderson Far East Income (HFEL) seeks to provide both income and capital appreciation by investing in equities in the Asia-Pacific region. The manager's...
© 2014 Edison Investment Research.

View more research papers »

Today's Best Bank Rates
RaboDirect 4.00  
Westpac 4.00  
Based on a $50,000 deposit
More Rates »
Cash PIE Rates

Cash Funds

Institution Rate 33% 39%
ANZ 2.60    2.67    2.79
ASB Bank 3.15    3.29    3.44
BNZ 3.30    3.44    3.60
Direct Broking Call Account 2.80    2.92    3.05
Heartland Bank 4.00    4.28    4.48
Kiwibank 2.40    2.50    2.61
Kiwibank 3.15    3.29    3.44
Nelson Building Society 3.75    3.90    4.08
RaboDirect 3.30    3.44    3.60
SBS Bank 3.00    3.11    3.28
TSB Bank 3.50    3.63    3.80
Westpac 3.00    3.12    3.26
Westpac 0.10    0.10    0.11
Westpac 4.00    4.18    4.37

Term Funds

Institution Rate 33% 39%
ANZ Term Fund - 90 days 3.00    3.08    3.22
ASB Bank Term Fund - 90 days 3.00    3.08    3.22
ASB Bank Term Fund - 6 months 3.75    3.85    4.02
ASB Bank Term Fund - 12 months 4.00    4.18    4.37
ASB Bank Term Fund - 18 months 4.10    4.28    4.48
ASB Bank Term Fund - 2 years 4.20    4.40    4.59
ASB Bank Term Fund - 5 years 5.00    5.25    5.49
ASB Bank Term Fund - 9 months 4.00    4.18    4.37
BNZ Term PIE - 120 days 3.50    3.58    3.75
BNZ Term PIE - 150 days 3.30    3.38    3.53
BNZ Term PIE - 5 years 5.30    5.58    5.83
BNZ Term PIE - 2 years 4.40    4.60    4.81
BNZ Term PIE - 18 months 4.20    4.40    4.59
BNZ Term PIE - 12 months 4.10    4.18    4.37
BNZ Term PIE - 9 months 3.80    3.97    4.14
BNZ Term PIE - 6 months 3.80    3.97    4.14
BNZ Term PIE - 90 days 3.00    3.08    3.22
Co-operative Bank PIE Term Fund - 6 months 4.00    4.11    4.30
Heartland Bank Term Deposit PIE - 12 months 4.35    4.54    4.74
Kiwibank Term Deposit Fund - 90 days 3.30    3.38    3.53
Kiwibank Term Deposit Fund - 6 months 3.75    3.85    4.02
Kiwibank Term Deposit Fund - 12 months 4.10    4.20    4.41
Kiwibank Term Deposit Fund - 150 days 3.60    3.70    3.86
Kiwibank Term Deposit Fund - 120 days 3.30    3.38    3.53
RaboDirect Term Advantage Fund - 12 months 4.00    4.11    4.30
RaboDirect Term Advantage Fund - 6 months 3.85    3.96    4.14
RaboDirect Term Advantage Fund - 90 days 3.25    3.34    3.49
Westpac Term PIE Fund - 150 days 3.25    3.34    3.49
Westpac Term PIE Fund - 120 days 4.00    3.34    3.49
Westpac Term PIE Fund - 18 months 4.30    4.32    4.51
Westpac Term PIE Fund - 12 months 3.85    3.96    4.14
Westpac Term PIE Fund - 6 months 3.75    3.86    4.03
Westpac Term PIE Fund - 9 months 3.80    3.90    4.08
Westpac Term PIE Fund - 90 days 3.00    3.09    3.22
Westpac Term PIE Fund - 2 years 4.75    4.52    4.72
About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by PHP Developer and eyelovedesign.com