US Federal Reserve rows back. Call it the Fed two step — there’s a vast difference in wording and tone between the post-December rate rise meeting decision, and the sit-and-watch decision this morning. From the belief the economy was solid in December, we now get a wind-back and an acknowledgement that “economic growth slowed late last year”. And the Fed no longer believes the risks are balanced between an economy picking up steam and one slowing further. Business investment, called “strong” last month, is now “moderate.” And the Fed is now closely monitoring “global economic and financial developments” after the slow start to 2016 across the globe.

“Inflation is expected to remain low in the near term,” the Fed said in new, more cautious language in this morning’s statement. But this doesn’t rule out a rate rise in March, just makes it harder to be certain. The question for the Fed is how damaging the rough start to the year in financial markets — especially in oil prices and the huge cuts in investment and other spending across the energy sectors of the economy — will be. That is already undermining states such as Texas, Wyoming, Montana, North and South Dakota and states around these big oil and gas states. US Steel reported a 37% slide in revenue for the quarter because of slumping demand for steel pipes and products from the energy sector and rising imports (from China). — Glenn Dyer

Kiwis hold rates. On the other side of the globe, the Reserve Bank of New Zealand this morning joined the Fed in not changing interest rates as it contemplates an economic puzzle just as challenging as the Fed’s. Like the US, NZ has been buffeted by the uncertain start to 2016, especially in its biggest export market, China. At the same time, inflation remains very weak. In fact consumer price inflation has eased to the point where deflation appeared in the three months to December, meaning it will take longer for inflation to return to the 2% target range — much longer than the RBNZ was expecting in December.

RBNZ governor Graeme Wheeler warned that it might take more rate cuts to stimulate the economy and boost inflation (those cuts could also cushion the economy if China worsens). That’s not withstanding a slowing, but still strong, housing boom in Auckland, and signs of rising prices in other parts of the country. The commentaries by the Fed and the RBNZ seem certain to be repeated in tenor in next Tuesday’s post-meeting statement from RBA governor Glenn Stevens — his first for the year (and his last year in office). Local inflation was not a problem in the December quarter, even though there was a slight easing in the core reading to around 2%. — Glenn Dyer

Fonterra hacks. Still in NZ and Fonterra this morning added to the RBNZ’s worries by slashing its expected return to the country’s struggling dairy farmers to under NZ$5 a kilogram for milk solids. The price for the 2015-16 season is now NZ$4.15 (A$4.52) a kilogram of milk solids, down from the previous NZ$4.60 a kilo. And when combined with the earnings per share and retentions, this will come to a forecast cash payout of NZ$4.50-$4.55/kg, well below the NZ$5 mark, which is considered break-even for Kiwi dairy farmers, many of whom are struggling to cover costs, especially bank repayments — including to the big four Aussie banks, which have a reported exposure to the dairy sector of A$30 billion. (That is their single largest sectoral exposure outside of Australia, according to our Reserve Bank).

Since last September, prices at the GlobalDairyTrade auction for whole milk powder have fallen 12%, and skim milk powder prices are down 8% (this is on top of falls of 40% to 60% in the previous 18 months). This will cut hundreds of millions of dollars more of potential spending from the Kiwi economy in the coming year on top of the billions drained by the previous price falls. Returns to Kiwi dairy farmers are down nearly 50% in a couple of years. A total of NZ$8.40 a kilo was paid in the 2013-14 season. This is a growing headache for the central bank and means even greater pressure to cut interest rates at its March meeting. — Glenn Dyer

Peter Fray

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