A Failure of Understanding

Terry McCrann continues his efforts to educate the punditocracy on the relationship between the official cash rate and retail lending rates:

What has never been understood, not just by the general public but by even the supposed literati—politicians and the economentariat—is that the Reserve took those bank increases into account in deciding the official changes. If they hadn’t happened, official rates would have gone higher.

The associated failure to understand, is that the Reserve quite deliberately set out to slow the economy. We didn’t stumble by mistake into this slowdown.

posted on 18 October 2008 by skirchner in Economics, Financial Markets

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