You are exactly right.

However, one thing I would like to point out is that the Bank has generally got very angry whenever anyone mentions doing it at the moment – there seems to be some sort of new found bias against it at the moment. As a result, I think the threshold is a bit higher than in 2003.

Personally I am a big fan of keeping on an endogenous interest rate track – however, if the rates suggested by that seem to high maybe they should turn around and look at their forecasts again …

I know the RBNZ doesn’t want to bend the rules, but the facts are that (1) they’ve done it before, in what was a very un-extreme situation (March 2003), and (2) they’ll end up effectively doing it anyway – if they don’t get the recovery they’re looking for, and they can’t take rates lower, the only alternative is to keep pushing the projected rate hikes further out into the future.

In an extreme situation they should be willing to bend their interest rate rules – now of course we may not even be in that situation now, and even if we were the RBNZ REALLLY doesn’t want to do that 😛

I agree that this is the key justification for the Bank’s actions – but they could have actually focused the discussion on households instead. It just sounded like a complaint about the fact that the market doesn’t believe their 90 day bill track …

It’s a very good question. The RBNZ is kinda sorta doing this already – they are one of the few central banks who publish an explicit forward track for interest rates. But I think they could do more with it, i.e. use it more as a statement of intent and less as a mechanical (and extremely conditional) forecast.

Well if he is unhappy with the prices banks are charging for loans and he thinks they should be charging less, he could increase pressure by giving confidence on medium term rates – to pick up Miguel’s metaphor “I will not be beaten on price!”

Your question is fine – the only thing I would ask is why? If people are making sensible decisions about when to fix, then the RBNZ shouldn’t be trying to talk them into moving to floating – I suspect that the impact of having more floating rates on the effectiveness of monetary policy is over-rated.

Now, they are saying that they will keep rates very low for at least a year anyway – which is why they think current market rates aren’t making sense …