08-06-2007, 02:11 PM
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Member
Level up: 33%, 122 Points needed |
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Join Date: Feb 2006
Posts: 65
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Patience......
New Zealand Rate Rise Shocks Investors - Forbes.com
Quote:
New Zealand?s central bank shocked investors on Thursday with an unexpected increase to its already-sky-high interest rates.
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The central bank is seeking to fight inflationary pressures arising from strong domestic demand, a robust property market, low unemployment and rising government spending. The Reserve Bank said it was raising rates in order to keep inflation at roughly 1% to 3% over the medium term.
New Zealand is walking a tightrope with its monetary policy. The country is suffering from inflation because its high rates are attracting investment, much of which finds its way into local assets, notably housing. Investors are borrowing at low rates in Japan -- where overnight money goes for 0.5% -- and reinvesting in the high-yielding kiwi. The high rates have succeeded in slowing parts of the economy, but rising asset prices remain a concern. (See ? New Zealand Builds A Bubble?)
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