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11 Jun 2014
RBNZ to hike by 25ps to 3.25% - BNZ
FXStreet (Bali) - Bank of New Zealand expects the RBNZ to hike rates by 25ps, to 3.25%, at its Thursday’s MPS.
Key Quotes
We remain of the view the Reserve Bank will stay on the tightening path it indicated at the time of its March Monetary Policy Statement (MPS) and which it did nothing to deny at its April announcement. The moderation in the exchange rate over recent weeks has bolstered our belief in this. The March MPS track, you’ll recall, implied policy rate increases in June and July, and another in either October or December.
Yes, some the local economic information has since looked a bit slower. However, with some bits also proving stronger, we don’t believe the general data tone has provided cause for the RBNZ to alter the big picture it appears fixed upon. That is, of getting the OCR closer to a neutral level, without too much delay, on the basis the economy is fully back on the rails. We would certainly agree with this prognosis and approach.
Regarding the currency, yes Governor Wheeler expressed exasperation with it a number of weeks ago, to the point of discussing intervention. But we believe this, at least partly, reflected a feeling of frustration in being able to lift the OCR, as would be preferred. The recent fall in the exchange rate has been important in this regard. And, in numerical terms, it leaves the TWI little different to what the RBNZ assumed at the March MPS and a bit lower than it was when the Bank hiked in April. The recent moderation in the currency also shows it can, and will, adjust to news that New Zealand’s economy is looking less exuberant compared to others around the world.
As for the economic data, granted, the Q1 CPI printed lower than the Bank’s March MPS expectations and wage inflation was a point slower, along with the Q1 unemployment rate proving not nearly as low as the Bank presumed. Meanwhile, commodity prices are possibly falling a little faster than the Bank anticipated, with all eyes on dairy prices.
Key Quotes
We remain of the view the Reserve Bank will stay on the tightening path it indicated at the time of its March Monetary Policy Statement (MPS) and which it did nothing to deny at its April announcement. The moderation in the exchange rate over recent weeks has bolstered our belief in this. The March MPS track, you’ll recall, implied policy rate increases in June and July, and another in either October or December.
Yes, some the local economic information has since looked a bit slower. However, with some bits also proving stronger, we don’t believe the general data tone has provided cause for the RBNZ to alter the big picture it appears fixed upon. That is, of getting the OCR closer to a neutral level, without too much delay, on the basis the economy is fully back on the rails. We would certainly agree with this prognosis and approach.
Regarding the currency, yes Governor Wheeler expressed exasperation with it a number of weeks ago, to the point of discussing intervention. But we believe this, at least partly, reflected a feeling of frustration in being able to lift the OCR, as would be preferred. The recent fall in the exchange rate has been important in this regard. And, in numerical terms, it leaves the TWI little different to what the RBNZ assumed at the March MPS and a bit lower than it was when the Bank hiked in April. The recent moderation in the currency also shows it can, and will, adjust to news that New Zealand’s economy is looking less exuberant compared to others around the world.
As for the economic data, granted, the Q1 CPI printed lower than the Bank’s March MPS expectations and wage inflation was a point slower, along with the Q1 unemployment rate proving not nearly as low as the Bank presumed. Meanwhile, commodity prices are possibly falling a little faster than the Bank anticipated, with all eyes on dairy prices.