BNZ Weekly Overview - July 26 2007

Welcome to the July 26 edition of the BNZ Weekly Overview.

The Reserve Bank raised their cash rate to 8.25% today and signaled they think it is possible no further rise is warranted. But they said the same in October 2004 then raised the rate another 0.75%. They said that was enough in 2006 but boosted it another 1%. So for the third time this cycle the RB think they have done enough. But they probably haven't given positive growth indicators for the economy, good growth overseas, and resource shortages. That means today's small decline in fixed wholesale borrowing costs and the Kiwi dollar may be short lived. The Reserve Bank remain unwilling to finish the job and had they acted correctly over 2004 - 2005 we could be thinking about rate cuts at the moment and the currency would possibly be 10 cents lower. This isn't over yet unfortunately for non-dairy exporters.

Best regards

(See attached file: WOJuly26.pdf)

Tony Alexander Chief Economist Economics Bank of New Zealand

ENDS

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