I am not sure how the speed of the transmission mechanism is relevant? Ultimately, the Bank did not cut interest rates until now because it did not realise how sever the slowdown in global economic activity would be – no one did until a few weeks after Lehman’s collapse.

There is a definite lag in policy, and that won’t be helped by the fact that credit markets are in chaos – however, the main reason that they did not cut was imperfect information. I still think that what they did was right (at least over 2007) ex ante.

Good to see the admission that peak oil is no longer a problem.

Also, peak nickel, peak corn, peak wheat, peak iron, peak copper, peak…

Very fair call – I will be careful to do so in the future 🙂

“And we know what was driving inflation”

Yes, elevated levels of inflation expectations that found its way into the wage bargain.

“The Reserve Bank failed to look through the global commodity increase driven by the approach of peak oil.”

Huh? They let inflation expectations rise when commodity prices were at relatively low levels, but the level of domestic activity was too hot – their mistake was not lifting over 2003/04, not “lifting too much” in 2007

Just a wee point, my opinions are my own, not necessarily those of my fellow Standard writers. So, if you would be so good as to attribte opinions to the specific writer, that would be cool