Quote:
Originally Posted by tom64
Jun. 2008 CPI: Q1: 1.6 Y/Y:4.0 Tradeable: Q1: 2.3 Y/Y 4.8 Non-Tradeable: Q1: 0.9 Y/Y 3.4
The above numbers above indicate that inflation is high in New Zealand. Because they have an 8.7% current account deficit, New Zealand will be forced to import inflation. If the RBNZ cuts to foster growth then non-tradeable and tradeable inflation will rise. CPI in general is on the upside. I am guessing that the RBZD is perceived to be Dovish odd considering int rates are so high. Let me know what you think.
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Like the situation in the US and UK, high interest rates are the only consideration for monetary policy decisions in New Zealand.
Though Bollard's mandate is to keep inflation in line, he also has to make sure its stable through the long-term - which is also a function of the economy's health. If consumers aren't spending and businesses activity is slowing, inflation is likely to be largely imported (as you suggested), but domestic policy makers can do anything to correct global price pressures - and certainly not through further taxing their own citizens with higher interest rates.
Bollard has said straight up that he expects to lower interest rates this year. One cut wouldn't reduce the carry in many of its pairings, but its what is in store beyond that that is keeping traders out of buying the kiwi.
