The Reserve Bank’s darker tone today is clearly worrying but – in the short term at least – it is likely to be good news for KiwiSavers, mortgage holders and exporters.
KiwiBank has already said it will cut its five year fixed rate by 80 basis points to 4.29 per cent from Monday – a move likely to spark a reaction from competitors.
After the Reserve Bank indicated its next interest rate move is more likely to be a cut than a rise the dollar plunged and the sharemarket rose.
The dollar fell almost one cent to just above US68c. The share market is up more than one per cent. In fact the NZX-50 is now up 10 per cent for the year to date.
The Reserve Bank has effectively joined its counterparts in Australia and the US in shifting gear as fears of a global economic slowdown grow.
We shouldn’t pretend the retreat by central banks this year is a something to cheer.
It reflects an inability to get monetary policy back to what we used to assume were normal settings.
But the trend does mean mortgage rates are likely to stay lower longer – good news for heavily indebted home and business owners.
