May 16, 2008

Borrowers Should Not Gloat Over Retail Figures

Brian Fallow reminds us that while the fall in retail sales suggests that Bollard has wrung a further inflationary force out of the economy, but the impact of the fall in the dollar will increase some other prices. The Hive doesn't worry as much as Fallow about this short term price adjustment. It is a one off and inevitable. Bollard has been saying that the dollar is too high for some time. He has been suggesting that it should fall. We can't see the Reserve Bank keeping interest rates high to prop up the dollar.