RBNZ: Why it’s so dovish? - ANZ

Analysts at ANZ tries to explain the dovish stance of RBNZ.

Key Quotes

“Capacity pressures are growing, headline inflation is close to hitting 2%, global growth is looking stronger and the NZD is down. It’s easy to point to the risk of inflaming the NZD on a shift in stance, the risks of moving pre-emptively (two failed attempts already) or global uncertainty. However, one thing that we don’t believe is fully appreciated is the tightening in credit conditions already being seen across the economy. It is not just that retail mortgage interest rates are going up; it is the price and quantity of credit to the business and agricultural sectors too. It is broad-based and is likely to continue. While it doesn’t change our core expectation of solid momentum, it adds another layer of uncertainty. The economy needs the credit channel to be tightening at this juncture (it will help elongate the cycle), but such a tightening is fraught with tensions and challenges.”