Basic knowledge of financial data can help save money

Thursday 5 August 2004

How to pin tail on donkey

By The Landlord

ECONOMICS: Financial data look dry but even a basic knowledge can help save you money in the long term

Economic statistics can seem dry and dull, but what's going on in the economy affects your back pocket.

A little understanding goes a long way to anticipating interest rate changes and helping plan finances.

The Reserve Bank of New Zealand independently decides monetary policy and sets a benchmark interest rate, called the official cash rate (OCR), which commercial banks use to determine mortgage, deposit and lending rates.

When the letter arrives to say your variable mortgage rate is going up or higher term deposit rates encourage you to save more, the Reserve Bank has made an OCR decision.

So Thursday's Reserve Bank decision to raise the OCR to 6 per cent will likely filter down to a personal letter from your bank soon.

The financial markets fluctuate according to opinions about what is happening in the economy and how banks and brokers think the Reserve Bank will react.

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