Analysts at Rabobank note that in today’s RBNZ meeting, rates were left on hold at 1.75% and the Bank noted that despite the usual hope that all will be well eventually.
Key Quotes
“Given the weaker global economic outlook and reduced momentum in domestic spending, the more likely direction of their next OCR move is down;
Employment is near its maximum sustainable level. However, core CPI remains below their 2% target mid-point, necessitating continued supportive monetary policy;
The global economic outlook has continued to weaken, in particular amongst some key trading partners including Australia, Europe, and China. This weaker outlook has prompted central banks to ease their expected monetary policy stances, placing upward pressure on the NZD;
Domestic growth slowed in 2018, with softness in the housing market and weak business investment contributing;
The balance of risks to this outlook has shifted to the downside. The risk of a more pronounced global downturn has increased and low business sentiment continues to weigh on domestic spending. On the upside, inflation could rise faster if firms pass on cost increases to prices to a greater extent; and
They will keep the OCR at an expansionary level for a considerable period to contribute to maximising sustainable employment, and maintaining low and stable inflation.”
“So a realistic assessment from a central bank – and not one with a happy ending guaranteed.”
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