KEY POINTS:
When in doubt, do nowt.
That's the Reserve Bank's bottom line conclusion in the face of the exceptionally high levels of uncertainty about the global and local economic outlook.
The big uncertainty is how ugly the global credit squeeze will get.
Will the United States slip into recession? If it does, how much will China and the rest of the world be affected? And if global growth does slow a lot, will this be one of the cases where New Zealand is able to shrug it off?
It might be.
Export commodity prices, especially for dairy products, are very high and the dollar has plenty of room to fall.
On the home front, the Bank still sees inflation pressures as intense. That makes a precautionary easing of interest rates very risky. It has been careful not to endorse market expectations that it will start cutting interest rates by March next year.
The Bank takes comfort from signs that the housing market is cooling. A lot of borrowers face mortgage rate increases of a full percentage point or more as their fixed rate loans come up for reset over the next 12 months.
In addition, the net inflow of migrants has dwindled.
But on the positive side, the tight labour market and Fonterra's forecast payout will boost incomes.
On the shake-out in the finance company sector, it expects the effect on the wider economy will be "relatively contained" as they represent a small proportion of total lending and in some of the areas they serve the banks may expand their lending.
