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Dominick Stephens, chief economist at Westpac, notes that the Reserve Bank of New Zealand left the OCR at 1.75% as per the expectations in its first review of 2019, while the tone of the statement was more dovish compared to November.

Key Quotes

“The projected OCR track was around 20 basis points lower, with the RBNZ noting that it expects to keep the OCR at its current level over the next two years. The comment that “the next OCR move could be up or down” was returned to the statement, having been removed from the November statement after a run of strong data.”

“These headlines were all very much in line with our expectations, but some of the details were less dovish than we might have expected. Overall, the RBNZ has stuck to its view that inflation pressures in New Zealand are slowly building.”

“Inflation was forecast to slow to 1.4% in 2019, with the recent plunge in fuel prices acting as a drag. Inflation is expected to rise to around 2% over the medium term, a bit lower than their previous forecast.”

“Financial markets have been moving towards pricing in the possibility of an OCR cut by the end of this year. Today’s statement didn’t do much to endorse that view. Consequently, the New Zealand dollar rose by 0.7 cents to 0.6800 and swap rates rose by 4 basis points.”