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The Reserve Bank of New Zealand, left the key interest rate unchanged as expected at 1.75%.  The NAB Research Team kept its no near-term rate change view and modestly delay their forecast rate hikes.

Key Quotes:  

“The reaction to today’s Monetary Policy Statement indicates that financial markets saw the missive as being more hawkish than anticipated. The NZD is up over 1.0% and the chance of a near term cut in interest rates has been significantly reduced.”

“Could the next move in interest rates be down? Absolutely. In particular, if the wheels fall off the global economy then the backwash from this could demand some extra help from the RBNZ. But these are risks and should not be considered as the central forecast. And don’t forget that, currently, we already have a good deal of monetary stimulus, there’s more fiscal stimulus on its way and this at a time when the economy is already significantly capacity constrained.”

“The Bank did move the increase in its interest rate track back about six months. We were expecting this given the uncertainties that pervade and because its target variables are forecast to stay on target for some time. Nonetheless, the RBNZ modelling “machine” still takes over at the end of the forecast horizon to nudge the cash rate up to 2.4% by the end of the forecast period.”

“”We have simply pushed our first rate increase back from November 2019 to May 2020. Everything else remains the same. In doing so it presents a better central view. There is still a chance that any tightening comes earlier than we have forecast but, equally, we could see rates stay where they are for a much more protracted period of time.”