Tony Alexander - September 12 Weekly Overview
Tony Alexander – Weekly
Overview September 12 Weekly Overview
September 12 Weekly Overview
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The Reserve Bank did as everyone expected and left their cash rate unchanged at 2.5% this morning. But they were a bit more hawkish in their comments than expected. This simply feeds into the warning we are giving that floating interest rates will be rising this year. As regards where they peak and when – that is impossible to reasonably predict yet given uncertainties surrounding economic growth, inflationary pressures, and exchange rate movements here and overseas. But borrowers should be very careful about thinking floating through the entire interest rates cycle is a good idea. History shows NZ interest rates tend to peak higher and spend more time going up than generally forecast at the start of the rates cycle.
As regards the NZD – pressures remain largely upward, especially with some good data out of China this past week. Volatility will continue however and one of the biggest sources has been and will be changes in market views regarding the speed of US money printing tapering in the United States.
On the data front we learnt this week that non-primary manufacturing output remains flat, that consumers are starting to spend more, and that the labour market has yet to fire – which is interesting because some businesses are already reporting staff shortages.