Apr 23, 2008

OCR Decision

We were flattered to see that The Visible Hand In Economics used the The Hive as an example of "commentators believe that the slowing pace of domestic economic activity merits a rate cut". This is true we do, but we are not expecting one quite yet, and certainly not tomorrow. If Bollard is true to form (last time he delayed interest rate increases when they were needed just prior tot he election) we will see the first cuts in September/October. However, our preference would be July. Things will be pretty grim for many small businesses and households by about then. The trouble is that the OCR is not necessarily the determinant of business and household interest rates, so there could be some lag between a cut and anything that the public will notice. So perversely, if Bollard wanted people to be feeling less pain by October/November then he probably should be cutting tomorrow.............

We are anticipating major drops in the OCR and the exchange rate in 2009.