reserve bank of new zealand

Claire Jones

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FOMC/ BoJ votes

The big events next week are the Federal Open Market Committee and Bank of Japan policy votes.

The FOMC decision, due out Wednesday afternoon DC time, is not expected to see further quantitative easing announced. However, the FT’s Gavyn Davies says this does not necessarily mean we’ve seen the last of QE from the Fed: 

Claire Jones

The Bank of England’s forecasting record, both for inflation and growth, has in recent years been woeful.

But would the Bank have done any better if its officials’ pay depended on the forecasts’ accuracy?

According to a paper out today from the Centre for Economic Policy Research, the answer is yes.

 

The benchmark rate in New Zealand is back to its record low of 2.5 per cent after the Christchurch earthquake prompted a half point rate cut from the Reserve Bank. The move is intended to lessen the economic impact of the quake, stimulating the economy until the rebuilding phase begins.

“Even before the earthquake, GDP growth was much weaker than expected through the second half of 2010,” said the Bank. Consumers remained cautious, and the export sector, while benefiting from higher commodity prices, had been repaying debt rather than spending. Then came the earthquake. “Signs that the economy was beginning to recover early in 2011,” said the Bank, “have been more than offset by the Christchurch earthquake.”

Waiting for more robust growth and a little inflationary pressure, the Reserve Bank of New Zealand has again kept rates on hold. The official cash rate has been held at 3 per cent since mid-2010, when two 25bp rate rises lifted the rate from its record low of 2.5 per cent.

Governor Alan Bollard said: