A 50 point drop

The Reserve Bank has dropped the cash rate a full 50 basis points from 8.00% to 7.50%.

Reserve Bank Governor Alan Bollard said: “The New Zealand economy is experiencing a marked slowdown, led primarily by the household sector. The outlook for the global economy has deteriorated further in the wake of continued financial market turmoil. In addition, the New Zealand business sector is coming under pressure from both rising costs and falling demand. While domestic activity is likely to pick up late this year as a result of personal tax cuts, increased government spending and rising rural incomes, we expect a prolonged period of household sector adjustment and below-average growth.

I almost feel sorry for Bill English, if he becomes Minister of Finance in a few weeks.

I also remain concerned that inflation will remain too high for years to come.