About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds Other Sites:   depositrates.co.nz  |   landlords.co.nz
Last Article Uploaded: Sunday, July 31st, 7:58PM
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
  • Templeton Emerging Markets Inv. Trust
    22 July 2016
    New lead manager broadens TEMIT’s portfolio
    Templeton Emerging Markets Investment Trust (TEMIT) invests in emerging market-listed equities or in companies listed elsewhere where the majority of their...
  • The Biotech Growth Trust
    20 July 2016
    Positive industry fundamentals
    The Biotech Growth Trust (BIOG) is a specialist investment trust that aims to generate capital growth from a portfolio of global biotech stocks. The fund...
  • Standard Life UK Smaller Companies
    14 July 2016
    Outperforming in a weak market
    Standard Life UK Smaller Companies (SLS) is an actively managed UK small- and mid-cap focused trust with a quality-biased portfolio. Manager Harry Nimmo...
  • The Merchants Trust
    7 July 2016
    High and growing income
    The Merchants Trust (MRCH) is a very well-established trust investing in UK equities, primarily in higher-yielding, large-cap companies, which aims to...
  • Utilico Emerging Markets
    7 July 2016
    Focused emerging market investment
    Utilico Emerging Markets (UEM) aims to generate long-term total return from investing in emerging market equities, primarily in infrastructure and utility...
  • Witan Investment Trust
    4 July 2016
    Multi-manager global investment
    Witan Investment Trust (WTAN) is a well-established fund that is unique among its peers in having a predominantly multi-manager approach. It aims to generate...
© 2016 Edison Investment Research.

View more research papers »

Today's Best Bank Rates
RaboDirect 3.25  
Based on a $50,000 deposit
More Rates »
Cash PIE Rates

Cash Funds

Institution Rate 33% 39%
ANZ 0.75    -    -
ASB Bank 0.90    -    -
ASB Bank 1.05    -    -
ASB Bank 1.10    -    -
ASB Bank 1.15    0.18    -
ASB Bank 1.20    -    -
Heartland Bank 2.60    3.22    3.37
Nelson Building Society -    -    -
RaboDirect 1.75    1.81    1.89
SBS Bank 1.80    2.59    2.70
Westpac 0.55    0.57    0.59
Westpac 0.05    0.10    0.11
Westpac 2.75    2.83    2.96

Term Funds

Institution Rate 33% 39%
ANZ Term Fund - 90 days 2.60    3.01    3.14
ANZ Term fund - 12 months 3.25    3.64    3.80
ANZ Term Fund - 120 days 3.00    3.29    3.45
ANZ Term fund - 6 months 3.15    3.48    3.64
ANZ Term Fund - 150 days 3.00    3.39    3.55
ANZ Term Fund - 9 months 3.50    3.53    3.69
ANZ Term Fund - 18 months 3.30    3.64    3.80
ANZ Term Fund - 2 years 3.35    3.69    3.85
ANZ Term Fund - 5 years 3.60    3.85    4.02
ASB Bank Term Fund - 90 days 2.60    2.97    3.10
ASB Bank Term Fund - 6 months 3.20    3.49    3.65
ASB Bank Term Fund - 12 months 3.20    3.70    3.86
ASB Bank Term Fund - 18 months 3.20    3.75    3.92
ASB Bank Term Fund - 2 years 3.25    3.81    3.98
ASB Bank Term Fund - 5 years 3.55    3.97    4.14
ASB Bank Term Fund - 9 months 3.10    3.54    3.70
BNZ Term PIE - 120 days 3.00    -    -
BNZ Term PIE - 150 days 3.00    -    -
BNZ Term PIE - 5 years 3.60    -    -
BNZ Term PIE - 2 years 3.35    -    -
BNZ Term PIE - 18 months 3.30    -    -
BNZ Term PIE - 12 months 3.25    -    -
BNZ Term PIE - 9 months 3.25    -    -
BNZ Term PIE - 6 months 3.15    -    -
BNZ Term PIE - 90 days 2.60    -    -
Co-operative Bank PIE Term Fund - 6 months 3.20    -    -
Heartland Bank Term Deposit PIE - 12 months 3.40    3.79    3.96
Kiwibank Term Deposit Fund - 150 days 3.00    3.09    3.22
RaboDirect Term Advantage Fund - 12 months 3.40    3.50    3.65
RaboDirect Term Advantage Fund - 6 months 3.30    3.39    3.55
RaboDirect Term Advantage Fund - 90 days 2.85    2.93    3.06
Westpac Term PIE Fund - 150 days 2.80    3.08    3.22
Westpac Term PIE Fund - 120 days 2.70    3.13    3.27
Westpac Term PIE Fund - 18 months 3.20    3.58    3.75
Westpac Term PIE Fund - 12 months 3.20    3.58    3.75
Westpac Term PIE Fund - 6 months 3.00    3.38    3.53
Westpac Term PIE Fund - 9 months 3.10    3.44    3.60
Westpac Term PIE Fund - 90 days 2.50    2.82    2.95
Westpac Term PIE Fund - 2 years 3.25    3.85    4.02
About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by Web Developer and eyelovedesign.com