To the Reserve Bank, the cash rate and the state of NZ Inc.
It's assumed by most that the cash rate will be increased 25 points to 2.75%.
It's also assumed there will be another one by the end of the year. What happens after that has a “who knows” feel about it.
What I feel, to a degree, is a groundhog-ish sort of vibe.
We have been here before. We were here before the war. The momentum was building, the recovery was on and we started to feel good about the place.
Then Trump blew it up.
It turns out, if Westpac are right, the period of the war (April, May and June i.e Q2) wasn’t as bad as we thought it might be.
They argue we will see negative growth of -0.1%, so in other words, it's flat and a return to real growth in this current quarter. This is all good!
What the Reserve Bank worry about is inflation. Perhaps they shouldn't be as much as they might be? No it is not in the band, but it's tracking that way.
Business and their desire to bump prices has hit a wall. We simply won't pay and we'd rather not buy than pay more.
The exceptions are rates, power, insurance and imported stuff like oil and also, previously, food.
The Reserve Bank can look through oil a bit. Insurance is starting to be under control. Even power for some is starting to fall in price as generation costs fall.
Food at 1.9% is sorted. Rates of course are an ongoing scandal but, and this is where Kiwibank are right, there is enough there if you were of a mind to just take a beat and let this play out a bit further.
In other words, given we are back where we were about a year ago i.e on the move and feeling better, why would you take a hammer, or at least a negative view of it all, and squeeze when you don’t really need to?
Why risk choking off what little we currently have?
To my mind it is a persuasive argument. It's perhaps a weakness in the Reserve Bank riding instructions, the singular focus on inflation.
But we are currently coalescing under the broad idea of "here we go again", "it's coming right" and "at last, better days ahead".
Please, just for Wednesday, don't wreck it. Is that too much to ask?
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