Henry Thornton continues to unravel the interest rate story. What happens if a PM wants to impeach a Reserve Bank governor, when the only grounds for so doing are his madness? Who is Bernie Shylock, clearly a nom de plume on the Crikey site – could it be Ian Macfarlane himself? Will Terry McCrann please get on with the job of outing him.

Seriously, folks, this is a bit of a mess. Why did the Reserve Bank hold down interest rates for so long? What happens next given the conflicting signals – eg weak retail sales vrs high consumer confidence? Do the record numbers for the current account deficit CAD and international debt (in both cases relative to GDP) matter?

We predict that the Reserve will show great caution from here, and the further rate hike built into the market may well need to be unwound.

http://www.henrythornton.com/article.asp?article_id=3136