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29 Jul 2015
RBNZ Wheeler: Lower NZD necessary, further OCR cuts to be data-dependent - ANZ
FXStreet (Mumbai) - Mark Smith, Senior Economist at ANZ, provides insights into today’s RBNZ Governor Wheeler’s speech titled “Outlook for the New Zealand Economy, Inflation and Interest Rates in 2015”, which drove the New Zealand dollar higher beyond 0.67 handle.
Key Takeaways:
“As the title of the speech inferred, much of the content was highly market relevant. On-the-record speeches have proven to be a useful communications device for the RBNZ as it seeks to steer market expectations.”
“The speech attracted significant attention in light of last week’s rate cut, and the fact that the Bank did not have the luxury of a Monetary Policy Statement to explain its thinking of the July decision in detail.”
“This was particularly the case given the tone of the brief accompanying OCR Review statement was not as dovish as generally expected.”
“The speech faced a trickly balancing act: trying to maintain downward pressure on the NZD whilst encouraging the market to reassess the extent and timing of its rate cut profile. It is early days, but it looks to have achieved its goals.”
“The RBNZ confirmed that there is still a reasonable hurdle for further OCR cuts, albeit that these are seen as “likely”.
“The speech made considerable mention of the weaker terms of trade outlook, with the speech highlighting the difficulties facing the dairy sector. They conclude that “demand and output growth may be a little below trend”.
“In terms of the rate outlook, the RBNZ are keeping their options open, noting that the future path of the OCR will be driven by the flow of incoming data, the assessment of the economic outlook, and the Bank’s judgement as to what level of interest rates will achieve the Bank’s price stability goal. This is setting up the September MPS as a key event.”
Key Takeaways:
“As the title of the speech inferred, much of the content was highly market relevant. On-the-record speeches have proven to be a useful communications device for the RBNZ as it seeks to steer market expectations.”
“The speech attracted significant attention in light of last week’s rate cut, and the fact that the Bank did not have the luxury of a Monetary Policy Statement to explain its thinking of the July decision in detail.”
“This was particularly the case given the tone of the brief accompanying OCR Review statement was not as dovish as generally expected.”
“The speech faced a trickly balancing act: trying to maintain downward pressure on the NZD whilst encouraging the market to reassess the extent and timing of its rate cut profile. It is early days, but it looks to have achieved its goals.”
“The RBNZ confirmed that there is still a reasonable hurdle for further OCR cuts, albeit that these are seen as “likely”.
“The speech made considerable mention of the weaker terms of trade outlook, with the speech highlighting the difficulties facing the dairy sector. They conclude that “demand and output growth may be a little below trend”.
“In terms of the rate outlook, the RBNZ are keeping their options open, noting that the future path of the OCR will be driven by the flow of incoming data, the assessment of the economic outlook, and the Bank’s judgement as to what level of interest rates will achieve the Bank’s price stability goal. This is setting up the September MPS as a key event.”