RBNZ: no beating around teh bush - ANZ

Analysts at Nomura explained that there was no beating about the bush from the RBNZ yesterday. 

Key Quotes:

"The message was blunt and summed up by the fact that despite a lower NZD, inflation back at target, inflation expectations rising and the labour market tightening, the RBNZ feels that “Developments since the February Monetary Policy Statement on balance are considered to be neutral for the stance of monetary policy”. In other words, the RBNZ is not panicking and the hurdle for action is high. Right now, it seems quite clear that the RBNZ has far more confidence to deal with an inflation overshoot than the opposite, especially at a time when policy is already being tightened through the banking sector.

It is not just the RBNZ that views risks around the policy outlook as asymmetric. ECB Vice President Constancio was pretty clear on this too overnight, stating “Monetary policy loose for longer is less risky than premature withdrawal of stimulus.” When it comes to many central banks right now it is a case of ‘show me the inflation’!

In thinking about the near-term NZD outlook, the RBNZ’s stance is clearly something that could act as a topside cap (even though its own explicit view on the NZD has turned far more relaxed). That said, with the fiscal position strong, the data pulse generally good, NZ’s commodity basket generally outperforming, and our view that the RBNZ will eventually be surprised on the upside with the inflation outlook, it is hard to paint much of a downside case either, especially on a TWI basis."