TLDR: Isolation can breed a dangerous exceptionalism and Aotearoa-NZ is not immune. The drumbeat from local economists about the need for higher interest rates continues to drown out what is actually happening with our two largest trading partners.
There is a growing risk we tighten just as the rest of the world’s inflation impulse is weakening. See more on that below the paywall fold.
In the news overnight:
China locked down an office building in Beijing after finding a single case of omicron inside (CNN);
China eased monetary policy after reporting its slowest GDP growth in 18 months (Reuters);
US economists lowered GDP growth forecasts because of omicron and the effects of higher mortgage rates and inflation on consumer demand (WSJ); and,
Europe’s largest economy, Germany, is set to slide back into its second recession of the pandemic era due to omicron and weak consumer spending.
Coming up today, I’ll be covering the NZIER’s QSBO survey results for the Dec quarter and looking at whether any review of the CCCFA will loosen the shackles on mortgage lending here. Cabinet meets tomorrow and we’re expecting more details on the Govt’s omicron response measures on Thursday. I welcome any detail or suggested questions about the CCCFA and omicron from paying subscribers in the comments below. Yesterday’s comment thread was a cracker.
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