Wow. What a month full of thrills and spills!

We started the month with a bang as the Japanese central bank announced an interest rate hike and this sent the Japanese share market into free-fall, losing 12% in one trading day.

This was the largest one day fall since 1987’s “Black Monday”.

The shockwaves were felt around the world and punters scrambled for cover in case this was the beginning of a major global correction. Profit taking out of the strong performing tech stocks added to the misery.

After a day or so of punishment, markets stood up, brushed themselves off and bounced back strongly.

Stronger US economic data and inflation numbers certainly helped with the recovery. Despite the hectic start to the month, by the end, we saw some positive returns across the board.

At home, Adrian Orr, the Reserve Bank (RBNZ) Governor, eased the interest rate hand brake, delivering the first Official Cash Rate (OCR) cut in about 4 years. The rate cut came one year earlier than the RBNZ had anticipated a few months earlier.

The RBNZ’s forecasts now have the OCR sitting at 4.9% in the December quarter, implying two more 25-basis-point rate cuts this year. Knocking another 0.50% off the current rate would bring the OCR down to 4.75%. The RBNZ’s targeted endpoint is 3% in June 2027.

There is some sunshine on the horizon for borrowers.

The RBNZ’s rate cut was welcomed with a strong rally in the NZ stock market (up 2%) and a modest fall in shorter term interest rates. Stocks were buoyed by activity on Wall Street the night before, so it is hard to know how much of the rise is a direct result of the Reserve Bank decision.

All eyes now turn to the next US Fed decision in mid-September. The question is not will they cut but rather by how much (0.25% or 0.50%)?