KEY POINTS:
With both words and deeds Reserve Bank governor Alan Bollard has moved to boost confidence today.
The full percentage point cut in the official cash rate to 6.5 per cent is the steepest since the OCR was introduced nearly 10 years ago. It brings to 175 basis points the cumulative easing since July and he signalled more to come.
His comments made it clear that while the turmoil in international financial markets and the worsening outlook for world growth were front-of-mind in this decision, the bank is not happy to see non-gradable inflation still running so hot. He singled out the electricity sector, local authorities and wage costs as the main concerns there.
But, as the governor reminds us, the news is not all bad. In addition to lower interest rates, fiscal policy has loosened, oil prices have halved from their July peak and the dollar has fallen substantially.
Hopes for an export-led recovery next year may have take a knock with the prospect of a global recession.
But Bollard sees "a flattish economy for a while, not necessarily continuing recession... We do see a very slow pick-up out of the current recessionary conditions."
It's a reminder that while it may feel as if we are in free fall, there is a stout bungee cord around the economy's ankles.
