Here's our summary of key news from over the weekend in 90 seconds at 9 am, including news an increase to the Official Cash Rate (OCR) is expected this week.
The Reserve Bank is expected to increase the OCR by 25 basis points to 2.75%, its first rise since July 2010. The New Zealand dollar is at about US84.4 cents this morning, A93.4c, with the Trade Weighted Index not far off its 79.30 record high at 79.14.
The US economy added a more than expected 175,000 jobs in February, the US Labor Department says, despite cold winter weather gripping much of the country. This leaves expectations intact that the Federal Reserve will continue tapering its massive quantitative easing programme when the Federal Open Markets Committee next meets on March 18 and 19.
Economists had forecast non-farm payrolls would rise by 149,000. The US unemployment rate, however, rose to 6.7% from a five-year low of 6.6%. The Fed has said its target range for the Federal Funds Rate (its OCR equivalent) of 0 to 0.25% is appropriate at least as long as the unemployment rate remains above 6.5%.
China's exports fell heavily in February pushing the country’s trade balance into deficit, adding to fears of a slowdown in China’s economy. Exports in February fell 18.1% from a year earlier, with imports up 10.1%, leaving a trade deficit of US$23 billion for the month versus a US$32 billion surplus in January.
Chinese New Year holidays are being blamed, but the sharp and unexpected fall in exports comes after factory surveys since the start of the year point to weakness in economic activity as demand slips both at home and overseas. Chinese exports had been expected to rise 6.8% giving a February trade surplus of US$14.5 billion.
Also in China the country's bond market experienced its first default as solar panel manufacturer Shanghai Chaori Solar failed to pay full interest on its bonds. It's being described as a watershed moment for market forces in the world's second biggest economy because it suggests the government is backing off a practice of bailing out companies with bad debt.
Tensions remain high in the Ukraine with tens of thousands of people holding rival pro-unity and pro-Russian rallies, with Moscow continuing to strengthen its grip on the Crimea. British and German leaders telephoned Russian President Vladimir Putin to urge him to pull back from Crimea. And addressing a big crowd in Kiev, Ukraine’s Prime Minister Arseniy Yatsenyuk pledged not to give a "single centimetre" of Ukrainian land to Russia.
Meanwhile, Bloomberg reports the amount of debt globally has jumped more than 40% to US$100 trillion since the global financial crisis with governments borrowing as they battled to pull their economies out of recession and companies taking advantage of record low interest rates. Bank for International Settlement figures show a $30 trillion debt increase between mid-2007 and mid-2013 compared with a $3.86 trillion decline in the value of equities to $53.8 trillion.
The easiest place to stay up with today's event risk is by following our Economic Calendar here »
Daily exchange rates
Select chart tabs
4 Comments
If a rate increase is a given, then Wheeler has not been explicit enough or shown sufficient evidence of the causes this alleged inflationary trend being sustained .
Going slightly over 3% , may be a once -off or short-term trend due to abnormal items in the CPI mix
Migration is not known to be something that casues inflation , nor do specific wage rate adjustments such as we see in the building sector.
I suspect he really wants to normalise things , and wants to be very cautious , but this may put us out of sync with the rest of the OECD .
There are after all ,a whole bunch of under 30 year olds who have never had it so good and not had a mortgage costing over 6% , and thats not normal .
My counter argument agaisnt a rate increase is that I have not seen anything said or written about :-
- A sudden or sustained increasse in M3 money supply .
- an increase in PPI which is quite benign ( apart from the construction secotr)
- Employment reaching 2007/8 levels
- Wages outsdie construction and housing having rocketed
- And no evidence of food prices going up , other than seassonal adjustments
It will be interesting to see what he says. Bear in mind the bank economists have been talking up increases for years and its gone no where.
"money supply" certianly QE is that in drag....but there also needs to be spending, ie having more money sitting in bank vaults and not shifting through ppls wallets achieves diddly as we can see.
Employment, yes exactly....if its starts to drop significantly and with a trend...but it isnt.
Wages have rocketed? maybe for CEOs....
Food, I think there is pressure there, trouble is no one has money to pay more, see M3
regards
Ive been commenting for 5 or 6 years that for that time the cost of energy is what is inflating prices and especially commodities but in turn will cause their collapse but especially of assets (houseing, commercial, companies and hence shares, then pensions etc).
but then few it seems want to listen because there is no solution they like the sound of.
regards
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.