“As indicated in our March Statement, we are projecting interest rates to remain at relatively low levels for an extended period,” Governor Bollard of the Reserve Bank of New Zealand said in comments released today. He continued to warn of the possibility of rising interest rates. “The rise in longer-term interest rates is unwarranted and inconsistent with the monetary policy outlook,” he said.
He added, “the economic recovery is expected to be very gradual.” Not all will be rosy, however. “The risks around the outlook continue to be weighted to the downside,” he added.
These comments come as the Federal Reserve implements its historic quantitative easing program which plans to purchase $1.25 trillion of treasury debt and agency/mortgage securities. Since the policy measure was announced on Mar. 18 commodities have rallied as much as 8.9% as indicated by the S&P Goldman Sachs Commodity Index. Such shifts in money may be indicative of investor worries that the inflation outlook is of substantial concern and that rates may rise as a result. Contrary to Bollard's belief, the investment community may be embarking on a path that varies from that of his forecasts.
Al Bawaba
