This mornings announcement that the European Central Bank has lowered interest rates in Europe to an all time low of 0.25% highlights the growing issues facing the New Zealand Reserve Bank as it ponders its future interest rate strategy.
Not only do they have some domestic headwinds to deal with but international issues are also starting to pose a distinct threat to global growth and security.
In New Zealand we are seeing a massive slow down in dairy prices and a potential Fonterra milk price starting with a 5. That and other issues mean we are going to see lower growth than has been factored into interest rates so far.
Internationally though we still see very modest growth in Europe as evidenced by this mornings rate drop. Australia has so far maintained its rates but not lifted them as its economy shows nothing more than a faint heart beat and in the US the expected cessation of their money printing is happening much slower than expected.
Throw in the possibility of a major international conflict either in Ukraine or Syria and a potential slow down in the global power house that is China and the landscape is very rocky indeed.
It has already been accepted that the OCR will remain as is until early 2015 but there is now the very real possibility that could be longer.
A short term interest rate strategy continues to make sense.
Of course that could all change depending on the events of September 20!!
Not only do they have some domestic headwinds to deal with but international issues are also starting to pose a distinct threat to global growth and security.
In New Zealand we are seeing a massive slow down in dairy prices and a potential Fonterra milk price starting with a 5. That and other issues mean we are going to see lower growth than has been factored into interest rates so far.
Internationally though we still see very modest growth in Europe as evidenced by this mornings rate drop. Australia has so far maintained its rates but not lifted them as its economy shows nothing more than a faint heart beat and in the US the expected cessation of their money printing is happening much slower than expected.
Throw in the possibility of a major international conflict either in Ukraine or Syria and a potential slow down in the global power house that is China and the landscape is very rocky indeed.
It has already been accepted that the OCR will remain as is until early 2015 but there is now the very real possibility that could be longer.
A short term interest rate strategy continues to make sense.
Of course that could all change depending on the events of September 20!!
