TDLR: Te Pūtea Matua (RBNZ) is uniformly expected to hike the Official Cash Rate another 50 basis points to 3.5% this afternoon and argue, like other central banks, that it has to deliver tough medicine now to win back its inflation-fighting credibility.
The problem is the leading global indicators of inflation have already turned decisively lower and the concerted rounds of monetary policy tightenings, in tandem with tighter fiscal policies, could drive the global economy into an unnecessarily sharp slowdown. A UN agency took the unusual step last night of calling for central banks to back off to avoid hammering emerging economies.
I argue below there are plenty of signs inflation has already turned and central banks risk overdoing the rate hikes while looking through the rear vision mirror. They appear myopic in over-reacting to criticism about an inflation spike caused mostly by supply shortages linked to Covid and the war in Ukraine, both of which are fading.
Paying subscribers can see my full analysis, detail and charts below the paywall fold and in the podcast above. Also, big news today: the Substack App, where I put extras for subscribers, is now available on Android as well as Apple.
Elsewhere in the news overnight here and overseas…
Listen to this episode with a 7-day free trial
Subscribe to The Kākā by Bernard Hickey to listen to this post and get 7 days of free access to the full post archives.
