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Published: Thu, May 11, 2017
World | By Tasha Manning

NZ dollar falls after RBNZ unexpectedly sticks to rate track view


The RBNZ (Reserve Bank of New Zealand) is expected to drop its call to keep the interest rates at a record low 1.75% until late 2019, according to Credit Agricole (CA).

RBNZ Governor Graeme Wheeler said that a recent depreciation in the New Zealand dollar was "encouraging".

That stance put the RBNZ at odds with a number of economists, who expect it will have to raise rates earlier than 2019, however Wheeler told Parliament's finance and expenditure select committee that he wasn't seeing significant wage inflation and that weaker than expected growth past year meant there wasn't the same capacity pressures the bank may have been anticipating.

All 16 economists surveyed by Bloomberg expected Thursday's decision, and they all forecast the benchmark rate will remain at 1.75 percent throughout this year.

For the text of the statement double click on.

Despite positive inflation outcomes and a pick-up in inflation expectations they are sticking to their neutral stance, he said.

'The RBNZ should sound relatively more upbeat than in its recent policy meetings, particularly as the factors outlined above point to a shift up in the inflation projection profile over 2017 and into 2018.

A strong rebound in New Zealand card spending in April prompted the Pound New Zealand Dollar exchange rate to slump overnight.

Rain chances ramp up, a cool blast of air moves in
Rain may become heavy at times in the afternoon and early evening, which will lead to a slow-down in travel and ponding on roads. A complex weather system is poised to invade the WBTV news area later today , throwing rain down on many for the commute home.

May 11 (BusinessDesk) - The New Zealand dollar rose ahead of the Reserve Bank's monetary policy statement, which is expected to see the official cash rate kept at 1.75 percent but with an interest rate hike signalled sooner than in its last MPS three months ago. "The banking sector is already doing the work for the RBNZ by lifting rates amidst stiff competition for deposits and that's a story that will continue".

Then Mr Wheeler said he saw the reasons for the increase in headline inflation in the March quarter as "temporary", pointing to petrol and food prices.

House price inflation has moderated further, especially in Auckland. "This will bring future headline inflation to the midpoint of the target band over the medium term".

Any more hawkish notes from RBNZ Governor Graeme Wheeler could encourage the "Kiwi" to strengthen, even if market risk appetite remains limited.

"Not only has the OCR tracker been left unchanged, the bank also sees the recent spike in inflation as transitory and indeed it has lowered its year ahead inflation forecast", said NAB currency strategist Rodrigo Catril.

Growth will accelerate to 3.7 percent in the first quarter of 2018 from a year earlier, the RBNZ forecast today.

But Mr Wheeler said there were still uncertainties about the housing market and the global economy, which justified keeping interest rates on hold until 2019.

"This moderation is expected to continue, although there is a risk of resurgence given the continuing imbalance between supply and demand", Wheeler said.

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