Dawn Chorus: Fed sparks tightening wave

TLDR & TLDL: Interest rates are finally on the rise globally nearly three months after our Reserve Bank started hiking. I still think they’ll have to be rolled back next year, but our rate hikes are certainly spreading up north.

The US Federal Reserve yesterday signalled a faster tapering of its money printing and three rate hikes next year, which was rapidly followed by the European Central Bank saying overnight it would slow its printing. The Bank of England also hiked for the first time post-covid to 0.25% and Norway’s central bank hiked for the second time in three months to 0.5%.

But none of these big central banks see rates rising as fast or as far as our Reserve Bank. Our OCR is at 0.75% and the RBNZ forecasts it rising to 2.6% by early 2024. And our nearest neighbour is still not expecting to hike rates until the year after next. The Reserve Bank of Australia signalled last night it would keep printing through until February and reiterated it wanted to wait to see the whites of the eyes of wage inflation before acting.

My view: I’m still in Team Transitory on inflation (see more below the paywall fold from Paul Krugman) and still think these rate hikes will stop next year. They may even have to cut back again in 2023 as the inflation recedes and growth remains low because of all the structural problems remain: widening inequality is suffocating productivity growth and causing destabilising political ructions everywhere.

There was good news for Christopher Luxon in the first poll since his elevation to National’s top spot. Photo: Lynn Grieveson/TheKaka

In the news overnight:

• France closed its borders to British tourists (Reuters);

• Michael Plank released modelling to Stuff’s Keith Lynch showing omicron could increase case numbers by between 2,000 and 50,000;

• Fletcher Building told its 9,000 staff last night it would mandate vaccination for all on-site staff (Stuff);

• the first poll taken since Christopher Luxon’s election as National leader found National up 7 points to 31%, Labour down 1 to 40, ACT down 5 to 12%, Greens unchanged at 9% and NZ First unchanged at 4.2% (details of the Talbot Mills poll leaked via Politik-$$$ this morning);

• the poll also showed Luxon jumping to 26% from 2% as preferred PM, while PM Jacinda Ardern dropped from 47% to 43% last month;

• the centre-left vs centre-right blocs are 49% to 43% respectively, vs 50% to 41% last month - the gap has closed from 9 points to 6 points since Luxon’s elevation.

• See more scoops and must-reads for the weekend below the paywall fold. And paid subscribers get the podcast above, which today includes an interview with Chloe Swarbrick on PFA reform.

Later today, I’ll be doing my weekly Ask Me Anything at midday and will send a reminder email shortly before that. I’ll also put out my summary of the year’s big events: The year that was for the year’s end. It will have a special podcast attached.

Last week’s ‘hoon’ webinar with Peter Bale was his last for the year, but I have a special one planned with me and a couple of other guests for paying subscribers planned for 5.30pm for an hour. Paid subscribers can go below the Fun Thing for the link.

(And remember, here’s this special last-time-ever offer from me to you and other existing ‘free’ subscribers who’ve been putting it off, subscribe fully now for 50% off for a year to join the The Kākā discussion community, to get full access to all my daily emails and articles, and to get all my daily podcasts (like the one above that paid subscribers can listen to).

(This ‘Gravy Day’ offer is open until the end of Dec 21, 2021, to celebrate the first three months since we launched The Kākā on Sept 21. It’s the last special offer I’ll make for the foreseeable future. Subscribe to support my type of accountability and explanatory journalism about housing affordability, child poverty and climate change. You’ll also be able to find out what’s below the paywall fold today and see what’s in the full daily email, along with listen to my podcast above. FYI next Tuesday Dec 21 (Gravy Day!) will be my last day publishing this year. I’ll start again on Monday Jan 17.)