RB unhappy with long term interest rates

Daily updates from our bank have been showing a steady climb in long term interest rates.

That trend is concerning Reserve Bank governer Alan Bollard.

“In these circumstances we believe the rise in longer-term interest rates is unwarranted and inconsistent with the monetary policy outlook.

“As indicated in our March Statement, we are projecting interest rates to remain at relatively low levels for an extended period.”

Dr Bollard said that if this apparent distortion persists, it could put unnecessary pressure on the cost of borrowing by firms and households.

Interest.co.nz  calls it a jawboning statement and notes it resulted in a drop of more than a cent in the value of the $NZ.

Higher interest rates are enjoyed by people with money to invest, providing the real value isn’t being offset by inflation, but they are a significant cost for most businesses.

Dairy farmers get monthly payments which helps their cash flows but sheep, beef and cropping farmers usually get their income in chunks once or twice a year and need seasonal finance to tide them over between cheques.

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