29 Jan 2015
NZ vulnerability behind RBNZ’s neutral stance – Rabobank
FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank, notes that RBNZ’s policy stance of remaining neutral signals the vulnerable outlook for the NZ economy, with the central bank projecting annual inflation to remain below its band throughout 2015.
Key Quotes
“Last night’s policy statement from the RBNZ recognises the more vulnerable outlook for the economy. Only last month the Bank warned that rates would likely be increased at a later stage. Overnight, the central bank moved to a neutral bias suggesting that it expects to keep rates on hold (at 3.5%) for some time.”
“The justification for this shift was the recognition that annual inflation is likely to be below the target band through 2015 and could even be negative for a period before moving back towards 2% “albeit more gradually than previously anticipated”.”
“The Bank also reiterated the now familiar mantra that the value of the NZD was too high and “unjustified in terms of current economic conditions particularly exports and unsustainable in terms of New Zealand’s economic fundamentals”.”
Key Quotes
“Last night’s policy statement from the RBNZ recognises the more vulnerable outlook for the economy. Only last month the Bank warned that rates would likely be increased at a later stage. Overnight, the central bank moved to a neutral bias suggesting that it expects to keep rates on hold (at 3.5%) for some time.”
“The justification for this shift was the recognition that annual inflation is likely to be below the target band through 2015 and could even be negative for a period before moving back towards 2% “albeit more gradually than previously anticipated”.”
“The Bank also reiterated the now familiar mantra that the value of the NZD was too high and “unjustified in terms of current economic conditions particularly exports and unsustainable in terms of New Zealand’s economic fundamentals”.”