So what, on reflection, are we to make of the Reserve Bank governor Adrian Orr last week slashing the official cash rate by half a percentage point to a record low of 1%?
After all, just the day before Orr made his historic move, Finance Minister Grant Robertson was delivering assurances to anyone who might be listening of the NZ economy’s “solid fundamentals” as he celebrated the unemployment rate falling to 3.9%.
Why then would investment guru Brian Gaynor label the OCR cut as a “bizarre decision”?
In his widely read column in the Saturday edition of the NZ Herald, Gaynor wrote:
“Populist politicians and central bank governors are obsessed with taking measures to avoid any form of economic slowdown. This approach, which has been strongly influenced by Trump’s pressure on the US Federal Reserve Board, is unorthodox, because expansions and slowdowns are an integral part of the business cycle. The weird 0.5% rate cut…means our Reserve Bank has more limited options if NZ is confronted by a serious recession”. Continue reading “Lopping the OCR might be a stroke of genius – or an Orr-ful monetary policy blunder”