Long term rates out of whack: Larger OCR cut all on
The RBNZ stated today that long-term interest rates have risen too quickly. There forecast recovery was premised on a low dollar and a relatively flat yield curve – however, it seemed a bit disingenious to suggest that we would have a foreseeable strong recovery and a flat yield curve 🙂 . However, this logic was based on a special assumption – a slumping terms of trade.
As a result, the bank is likely to slash rates by at least 50bp at the next meeting. This was already more likely than during the meeting given the exchange rate – as we’ve discussed. This is a big announcement on their part – effectively we may well be pushing towards the lower bound of the OCR. In this case, we need to think more carefully about our monetary policy …
There will be a post at 11am that points out some good suggestions on this issue.
Note that the general market also feels this way – hence:
Source NBNZ
Matt
A great chart for chart-spotters isn’t it.
I logged on to the exchange rate charts just before the announcement, and they all suddenly started looking like Victoria falls.
@Alex Tarrant
Indeed, it is beautiful. It will be interesting to see what the reaction is like when foreign markets open …
[… – Good day! cool post -wery insightful 617.[… –
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