Thursday, March 10, 2011

RBNZ Drops Rate 50bps, But Why? And So What?

So the Reserve Bank of New Zealand (RBNZ) did what most economists were expecting and cut the official cash rate by 50 basis points, back to 2.50%, as an emergency response to the earthquake. Was it the right thing to do? Probably. Will it result in a harder inflation challenge later on? Possibly. From a confidence perspective, the earthquake did make a dent, but even before the earthquake things weren't exactly booming. So on balance the move will likely be positive for the New Zealand economy through 2011.

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