Mike's Minute: Hopefully Christian tells us the page has turned
It's the Reserve Bank outing this week. One last hurrah for the year. It has a certain anticlimax about it, doesn't it? It's probably going to be 25 basis points. 25 points is priced in by just about everyone. There is a chance it's zero. Next to no one says 50 basis points. Infometrics last week had the Q3 GDP number at 0.9% and I'm told the Q2 number is going to be revised up, which means if you add all that to the Q1 number then we've actually had a pretty decent year. "What? Are you mad? How can you say that?", I hear you say. Well, don’t shoot the messenger. These are either facts, or expert predictions. Either way they are to the right side of the equation. The point being is that's the sort of thing the Reserve Bank looks at. Is inflation in its box? Well, it’s a smidge high, given it’s 3%, so right at the top end, but technically still within the 0-3% range. If we cut further, they will ask, do we risk driving that number a bit higher through increased bullishness and spending? Quite possibly. Now I'm not personally arguing for a hold. But if you want to toss a few ideas about the place, that isn't a bad one. A case can be made for holding, for saying inflation is there or thereabouts and that the economy has got no shortage of green shoots, and 2026 looks okay so our job is done. The psychological advantage, no matter what they do, is not to be underestimated either. "If this is it, it's as good as it gets. It's as low as they go". Then a lot of people will make decisions around money and mortgages, and a lot of people have been holding. They've been in the waiting place and, as Dr. Seuss said, "the waiting place is no place for you". In a funny way it might also shake us out of our funk. We are disproportionately miserable, not because of reality, but because it's been so bad and we need a kick up the backside to get on with it. Maybe Christian Hawkesby, in his farewell flourish, offers not just the 25 basis points but a bit of uplifting hyperbole as he steps out the door. They have cut six times this year. We could end 2025 at 2.25%. It started at 4.25%. Shows you what a mess we have dealt with. But I get the sense the page has turned. See omnystudio.com/listener for privacy information.
New Zealand