So the OCR is now down to 6.5%. This was in line with market expectations given recent credit market turmoil.
According to the statement “ongoing financial market turmoil and a deteriorating outlook for global growth have played a large role in shaping today’s decision” – consistent with the view of the market
Although I was unimpressed by this statement:
With weaker short-term growth and sharply lower oil prices we now expect that annual CPI inflation will return to the target band of 1 to
3 percent around the middle of 2009
Given that a drop in CPI growth as a result in a fall of tradables does NOT imply that the Reserve Bank is achieving its mandate, they partially made up for it with this:
However, we still have concerns that domestically generated inflation (particularly in labour costs, local body rates, electricity prices and construction costs) is remaining stubbornly high
Non-tradables is a problem – we have had a recession and they haven’t declined. The Bank does need to ensure that non-tradable inflation goes below 3% before it can be confident about heading into easing territory.