ATTENTION!! – inflation for the year to the September 2008 quarter is 5.1 percent. Man the battle stations – raise the OCR!!

ATTENTION!!

Attention!

Attention??

#$%#$%!!!

Sorry, no one is listening. There are other things on our mind at the moment.

Come Thursday we can expect Dr Bollard to announce a drop in the OCR of at least one percent.

Is this New Zealand? Is this the Reserve Bank?

Yes. And we are happy to say that we are finally coming to our senses. BERL has long argued that monetary policy needs to consider employment and economic growth targets rather than just inflation. Just like Australia. Just like the US.

It is just unfortunate that it is a crisis of magnitude that is forcing us to finally act.

It is likely that even with a drop in the OCR the crisis will hit anyway; and inflation will be a non-issue over the next year, maybe longer.

The domestic pressures that have been underpinning inflation are likely to disappear. Housing is imploding, so people are feeling poorer. Petrol, which has accounted for almost 30 percent of the increase in the CPI over the last year, is expected to fall. The wet weather that has pushed vegetable prices up 20 percent in the last quarter surely cannot continue…

Inflation is currently over 5 percent. But it is unlikely to stay there. Even with a cut in interest rates.  Even with a falling exchange rate, even with increasing rates, even with ...