- As expected the RBNZ kept its Official Cash Rate on hold at 2.5%, and currently plans to remain on hold through 2013.
- Global bond yields have fallen back to recent lows, as a soft patch in global economic activity has been followed by a realisation that global inflation has also been falling below target.
- Indeed, the IMF have highlighted that the real puzzle is not why inflation is so low; but rather why we haven't seen deflation.
- With inflation expectations so firmly anchored, the Federal Reserve, Bank of England, and Bank of Japan are all erring on the side of providing too much stimulus, rather than providing too little.
- While we expect yields to rise from their lows in the medium-term, in our view this requires stronger economic data is required as a catalyst.
- Global growth expectations for 2013 are still broadly the same as the 2.0-2.5% growth delivered in 2012, which seems unlikely to unhinge inflation expectations for now.
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