No emergency cut was the right choice
Posted on: October 16, 2008
I was surprised at the time, but not doing an emergency cut appears to have been the right choice – go RBNZ 😉
I get this impression from here:
Source (NBNZ)
I saw 90 day bill rates rise to 8.1% (from 7.7%) just because of international funding pressures on short-term credit – at least thats what I thought it was. As a result, I felt a 50 basis point emergency cut could be justified. However, the international cuts had already brought us down to about 7.6% that day, and now we are at around 7.1%. This implies to me that the 100 basis points of cuts that are expected next Thursday are also expected to have some bang for their buck – crazy.
So the Bank is right at my expense again, I know they are smarter than me, but I swear they are luckier as well 😉
3 Responses to "No emergency cut was the right choice"
October 16, 2008 at 2:59 pm
“I did well shorting that one on iPredict. Could not see the sense in the early cut.”
It appeared that a cut would be consistent with the Bank’s goal for a certain interest rate from September – however, of course the rest of the world cutting interest rates had a flow on effect, fundamentally lowering the interest rate we had to set here to attract capital anyways. As a result, there was no need for a cut here. Obvious now it seems 😛
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The visible hand in economics 
October 16, 2008 at 2:57 pm
I did well shorting that one on iPredict. Could not see the sense in the early cut.