InterestRates #Inflation #RBNZ #BankOfEngland
Have you heard about the Bank of England’s decision to not drop interest rates even though they achieved their inflation target? 🏦💰 This got me thinking about what the Reserve Bank of New Zealand (RBNZ) might do in a similar situation. Do you think they’ll keep the OCR at a certain level once they reach their inflation goal?
Check out this article for more details: Bank of England Keeps Interest Rates on Hold Despite Achieving Inflation Target
Here’s a possible solution I’m considering – what do you think?
✨ Let’s discuss and learn from each other’s insights and perspectives! 🤔💬
So late 2025 for rate drops?
5.5 is not high historically. I think it will depend on how the economy is going. If we are doing well when we reach the target then i think they will leave it.
I suspect you’re right. Got to keep reducing domestic inflation, i.e clearing those commercial banks balance sheets in preparation for the next market cycle.
Sounds right, if they are within their 1-3% target range at 5.5% then there’s no need to drop it
They have no mandate to make borrowing affordable.
I hope they decrease only if inflation is going to be below target levels, or out of necessity from other countries central bank changes.
That means the current rates achieve the target inflation. It needs to be dropped only if the inflation goes below the target inflation.
It’s simple as if everything works great, why change things
It’s about anchoring inflation expectations at 2% going forward. Their job is price stability (not hit it and go home).
So if they can truly establish a credible path of inflation being between 1-3% then they will be able to move toward the neutral rate.
The other problem is timing; it’s about understanding the way interest rates flow into pricing and behaviour. Mortgage rates being the main one will still take about 6-18 months to flow into people’s spending patterns. Of course there will be a bump but the RBNZ and other CBs will look to observe any short term bump against a sustained price level change.
We are pretty tied to the USA too. If we drop too quickly our dollar will tank.
why wont someone think of the landlords 🙁
We pretty much follow the US for rate hikes and rate cuts, very similar schedules.
Their core inflation is still significantly higher. Expectations is for inflation to rise in the UK even without lowering interest rates.
If 5.5% gets us to the right inflation range, there isn’t any reason to drop rates further than that, as the bank has already got us in the right range. Interest rate drops are for when the economy needs stimulating.
Interest rates wont drop anywhere near 5% anytime before mid 2026 (if we are lucky) regardless of what happens with the economy. That won’t be such a huge difference on existing mortgages either way. If a few hundreds a month makes such a big difference then you overstretched yourselves.
A 2% target is still too high. That policy already ate a two income household’s purchasing power up over the last decade. That level of inflation is not sustainable.
The market has already priced a cut for November this year
Christ. The UK is the last place we should track or copy. At this rate we’re going to be following the UK straight into the same economic hole.
As a saver I am comfortable with rates where they are, to protect my capital from inflation.
The last two prints already have inflation in the band. You’re right, we simply can’t move first without tanking our dollar.