Greg Gibbs, analyst at Amplifying Global FX Capital, points out that the RBNZ said on 27 March that, “Given the weaker global economic outlook and reduced momentum in domestic spending, the more likely direction of our next OCR move is down” and was revised from its guidance on 13 Feb, where it said that, “We expect to keep the OCR at this level [1.75%] through 2019 and 2020. The direction of our next OCR move could be up or down.
Key Quotes
“A key consideration for the RBNZ was that the easier monetary policy stances by key trading partner central banks were “placing upward pressure on the New Zealand dollar”.”
“The RBNZ stated that the balance of risks to their outlook for inflation to rise towards its target had “shifted to the downside” (hence the easing bias).”
“However, it continued to conclude that, “We will keep the OCR at an expansionary level for a considerable period to contribute to maximising sustainable employment, and maintaining low and stable inflation.”
“In previous statements, this appeared to convey a long period of stable rates. But, now combined with an easing bias, it does not preclude the possibility that rates are cut at any time. It may suggest that the RBNZ is not in a big hurry to cut rates, but we presume the hurdle to a cut is relatively low.”
“The relatively new RBNZ Governor Orr is proving to be a flexible central banker, willing to adjust to developments swiftly, and appears to be making a more concerted effort to address the long-running undershoot of the 2% target than his predecessor.”
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