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Business Weekly Economic Report
Large cut is the path of least regret for RBNZ
Monday, 09 March 2009
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It was another tumultuous time for markets and economics last week. The RBA opted to pause – a decision that was, for a few short hours, lauded as a show of confidence. However, following the first decline in Australian GDP in 8 years the next morning it was consigned to history as a premature pause, as markets moved to reprice further easing.
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The BoE moved by 50 points to 0.5% - the lowest in the institution’s 315 year history - and announced a program to purchase commercial and UK government bonds.
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And now the RBNZ takes centre stage. Right now the world is an ugly place, economically speaking. As Dr Bollard said at the recent jobs summit, ‘this is big’. Given the bleak outlook, we expect the RBNZ to cut the OCR by 1% this Thursday.
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Report Prepared by:
Jane Turner
ASB Economist
Phone: +64 9 374 8185
Fax: +64 9 302 0992
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