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  1. #1
    Join Date
    Sep 2003
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    Default OCR unchanged at 7.25 percent

    OCR unchanged at 7.25 percent
    Thursday, 25 January 2007, 9:04 am
    Press Release: Reserve Bank
    OCR unchanged at 7.25 percent
    Date 25 January 2007
    The Official Cash Rate (OCR) will remain unchanged at 7.25 percent.

    Reserve Bank Governor Alan Bollard said: “While indicators show that economic growth was continuing to moderate in the third quarter of 2006, it is increasingly apparent that domestic demand has rebounded since then, with retail trade picking up, a resurgent housing market and consumer and business confidence recovering strongly. The main drivers appear to be the decline in petrol prices since last October, a pickup in net immigration and an expansionary fiscal policy.

    “At the same time, headline inflation has reduced as a result of the lower oil prices and the strengthening of the exchange rate in the fourth quarter. Annual CPI inflation fell to 2.6 percent in December and is projected to decrease considerably further through 2007, thus helping to lower inflation expectations. But the medium-term outlook is less rosy, with annual rates of inflation projected to return to the upper part of our target range through 2008 and into 2009.

    “While the near-term inflation outlook is relatively benign, we remain concerned about the upside risks to medium-term inflation. In particular, our assumption that the housing market and consumer demand will resume their slowing trend over 2007 and 2008 is looking more uncertain, particularly if further fiscal expansion occurs.

    “In the absence of clear indications of a moderation in housing and domestic demand, it is likely that further policy tightening will be required. The situation will be reassessed in the light of a full review of our economic forecasts at the March Monetary Policy Statement. A return to a moderating trend in housing and domestic demand will be essential if we are to see a reduction in medium-term inflation pressures.”

    http://www.scoop.co.nz/stories/BU0701/S00204.htm
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  2. #2
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    Jan 2004
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    1,545

    Default

    So what it's really saying, is the 30% drop in the oil price coupled with a high dollar saved us this time.

    So when oil goes up, and/or dollar does down, the OCR will go up.

    So when is oil going back up?, (which I believe it will).
    Find The Trend Whose Premise Is False - Then Bet Against It

  3. #3
    Join Date
    Jul 2005
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    382

    Default

    Hi GK

    I don't read it like that. AB has become very good at controlling indirectly through words. I think they know far more than they are letting on. The OCR has now been stable for a year. House prices are their concern and have been more stable than people realise. It is flattening out and may have a little life in it yet but not a lot. It is all looking very stable.

    The bigger issue is that as Aussie increases their rates and the rest of the world strengths than money will move out of NZ. This I think is what he realises. Then the IR will come down. If rents rise personal debt will reduce consumer spending, and with HP stable borrowing capacity reduced.

    I think the tightening is over.

  4. #4
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    Jan 2004
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    Default

    That's where we disagree, I don't think the RBNZ/Bollard has used much control at all, globalisation has seen to that.

    If you look at this article and it's graphs on M3, you can see how much money is being created and it's getting worse again, up to 15%. There has been no tightening effect thus far, it is still to come.

    http://www.interest.co.nz/bennett-17oct2006.asp
    Find The Trend Whose Premise Is False - Then Bet Against It

  5. #5
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    Jul 2005
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    Default

    That is what makes life interesting!

    I agree with all the premises I just don't agree with the conclusion. It will be a good year to see what happens.

    It is interesting because my thoughts are that the RBNZ started too late and is now playing catching up.

    However they ultimately will have to drive productivity and that will require a rate drop.

    Credit will stop spending as people finally have to pay their bills.

    http://xtramsn.co.nz/businessandmone...852605,00.html

    The squeeze will come naturally and reality will come home to roost.

    When that happens the money will go back out and the dollar will drop and as Buffett says we will see who is in the pool without their shorts.

  6. #6
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    Default

    The inflation/deflation debate goes on or will it be Stagflation with a bit of both?

    I say both, with oil/energy/commodities hikes ultimately forcing inflation.
    Find The Trend Whose Premise Is False - Then Bet Against It

  7. #7
    Join Date
    Apr 2005
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    2,711

    Default

    Gee, I wish I got paid that much to do nothing.

  8. #8
    Join Date
    Jul 2005
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    382

    Default

    This from todays paper:

    The unadjusted number of new dwelling consents issued for the month was 1,883 compared with 2,232 the month before and 23 per cent lower than a year earlier.

    The fall is further evidence of heat coming out of the building sector and may further encourage the Reserve Bank not to raise interest rates again at its next review in March.


    The funny thing the press business writers seem to know Jack about economics but react to a yo-yo to each piece of news.

    However, as I maintain the key is debt levels and living off debt. Once house prices stop, which IMO they have in many areas already then people will realise that they dont have the equity to spend and IR will come down. This coupled with the pull back by investors means we are there in all but a few towns.

    I realise more and more people are where GK is and saying they will rise but my bet is still that they will be stable and tightening is finished. AB just needs one more piece of info to feel comfortable and that is house price inflation to stop and he is done. Reality will always win and spending without production don't seem so real to me!

  9. #9
    Join Date
    Jan 2004
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    Default

    I don't think the OCR will go down until the rest of the world central banks stop tightening, they are still at it, and I believe the US will raise, Oz up at least 2 more .25's, UK.
    How can we go down, as we always have to pay that premium.

    The other effect to slow housing will be credit tightening, The US and Australian banks are doing it now. We can't be far behind.
    Find The Trend Whose Premise Is False - Then Bet Against It

  10. #10
    Join Date
    Jul 2005
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    Default

    My view is that like always RB will be too slow as they have to be so fn sure it is halted at which time it is going bckwrd before they drop. So yes it wont drop till mid late year but wont tighten.

    Credit tightening should happen natuarally as you cant tell me the banks are not struggling to get some of their money back. People seem to living in la la land, with the low levels of saving and high consumer debt.

    Again though banks in a quandry as low productivity results in low borrowing to invest in business and we know saving rates are non existent. So where do the banks turn...housing and loose credit.

    Roll on the tide and yes this will be an interesting year!


 

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