That's the good news. The bad news is that they've been forced to do it because they didn't do it earlier, as in, they haven't cut as quickly as they should have.
I mean, think back to July when they actually chose not to cut at all, which was clearly a mistake at the time - but became even more of a mistake when we saw the shock GDP number that followed.
We saw that in the three months before that decision, the economy had actually contracted by a whopping 0.9 percent and the Reserve Bank hadn't really noticed at all.
And the bad news, I suppose, again, is that they could have done a double cut last time when two of them on the Monetary Policy Statement said we should go double cut. But more of them said, no, let's just go with the single cut.
So they've gone with a double cut today - vindication for two, it would seem.
We're gonna stick to the good news though, which is that, finally, the Reserve Bank has caught up with the rest of us. The economy is cooked, and we need to do something, so they have delivered it. They admit that this is a signal.
The signal is it's okay to go out and spend and invest - because they've realized, finally, that people are freaked out, right?
There have been too many predictions of green shoots just before the economy falls again, which freak people out, and there have been too many bad surprises which freak people out.
Business confidence is shot, look at the QBSO yesterday. Consumer confidence is also slightly increasing, but still really negative.
People are holding on to their money, they're saving instead of spending, they're worrying instead of investing. And this cut is a circuit breaker that's supposed to snap us out of our fear.
Now, there are some who worry that we are actually already so freaked out that even this cut, given how big it is, could spook us all over again.
It's possible, maybe it could happen. But I think what's more likely is that it's going to give the assurance that people need.
And the assurance is that the people in charge of the economy actually realize how bad things are - and are prepared to be bold. And I'll tell you what, it's better late than never.
Heather du Plessis-Allan is a journalist and commentator who hosts Newstalk ZB's Drive show HERE - where this article was sourced.
3 comments:
Not long ago interest rates fell step at a time until they reached a point where there was not much room to lower anymore. Then ooops, inflation began to climb so interest rates began increasing step at a time. Then ooops the economy is tanking so interest rates began coming down step at a time util now yet again there is little more room to move. Waiting for the next ooops and the cycle to begin again. Perhaps the whole thing needs a review and NZ get back to being an active economic performer with real economic growth
Bull. The law says the RBNZ can only set interest rates with the aim of keeping inflation in a 1 to 3% range. The law was changed by Finance Minister Willis to explicitly forbid the Bank from cutting rates with the aim of simply boosting the economy, which is what it has done. The RBNZ's own monetary policy statement says inflation hit around 3% in the September quarter. It was an illegal rate cut.
But Liquid Lux and debating champ who knows no finance Willis, in cahoots with the oligoplies and Big Bank economists, have turned NZ into a zoo. Nothing makes sense anymore - only the backroom deals we know have been going on to exacerbate the cost-of-living crisis, although we've been stopped from reporting due to threats of defamation from the Big Law Firms protecting Big Business NZ Inc.
And the result not mentioned here will be, yield-dampening/rate suppression & funding-support i.e. (more debt).
RBNZ and other privately owned central banks must keep that debt machine financed and fully debt-fuelled. This mechanism will keep markets levitated, while at the same time slowing economic growth/crushing the economy by vastly inflating the debt, and further debasing the currency.
Policy makers crush the currency—and hence the people—to sustain their debt and themselves, pay down unfathomable sovereign debts by robbing from the people while smiling the entire time for re-election.
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