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Comments on: In defence of bank’s forecasts (sort of) http://www.tvhe.co.nz/2009/03/17/in-defence-of-banks-forecasts-sort-of/ The Visible Hand in Economics Tue, 17 Mar 2009 23:29:00 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: Matt Nolan http://www.tvhe.co.nz/2009/03/17/in-defence-of-banks-forecasts-sort-of/#comment-18124 Tue, 17 Mar 2009 23:29:00 +0000 http://www.tvhe.co.nz/?p=3265#comment-18124 “It’s simply bowing to the fact that when it comes to the cash rate, what the RBNZ says goes, for the next 6-7 weeks anyway.”

You are 100% right. However, I think long-rates are a bit vulnerable still …

“By the way, bank forecasters and the RBNZ do have a massively different view – on how much help we will get from the exchange rate”

Very true – and that is a function of the Bank’s view that weak world demand will hammer commodities, and that our dollar follows commodities.

However, both the Bank and retail bank’s have the same view about potential output – in reality the adjustment of the dollar merely means that the recovery is six months later in the view of retail banks. That is why I fundamentally see them as very similar – potential output is ultimately the same.

]]> By: Miguel Sanchez http://www.tvhe.co.nz/2009/03/17/in-defence-of-banks-forecasts-sort-of/#comment-18101 Tue, 17 Mar 2009 09:42:13 +0000 http://www.tvhe.co.nz/?p=3265#comment-18101 I regularly bag Roger’s analysis over at the interest blog and I’m going to do it here too. The turnaround in market rates has nothing to do with traders “throwing away their own banks’ gloomy forecasts” (my experience is that, if anything, traders are even more willing than economists to believe the worst about our economy). It’s simply bowing to the fact that when it comes to the cash rate, what the RBNZ says goes, for the next 6-7 weeks anyway.

By the way, bank forecasters and the RBNZ do have a massively different view – on how much help we will get from the exchange rate. The RBNZ is forecasting NZ growth to rocket ahead of the rest of the world, while at the same time the currency falls to record lows and stays there. I think they’re setting themselves up for disappointment on at least one front – although it’s hard to say how this will play into interest rate policy if their overriding concern is maintaining a margin over Australian rates.

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