26 May 2014
Risk of RBNZ holding fire in June - RBS
FXStreet (Bali) - According to Greg Gibbs, FX Strategist at RBS, RBNZ may pause at its next meeting on June 12th.
Key Quotes
"The New Zealand growth outlook remains strong above trend. However, for tactical reasons the RBNZ may decide to skip the next policy meeting and slip into a more gradual tightening schedule."
"The most recent indicators since the last policy meeting, on balance, have been weaker than expected. Q1 inflation was much lower than expected, and the RBNZ has warned several times since its last meeting on 24 April that the dampening effects of a high exchange rate will lessen the need to hike rates."
"Furthermore, wage growth was lower than expected and unemployment remained elevated in Q1, suggesting near-term inflation pressure is modest. The high LVR mortgage restrictions have worked at least as well as the RBNZ expected in cooling the housing market."
"Milk prices have continued to edge lower since the RBNZ noted in its 24 April policy statement that they had fallen 20% from their peak in February."
"With an election on 20 September, spacing out the tightening cycle to miss June, hiking in July, and skipping the meeting 9 days before the election all make sense. The RBNZ's desire for a weaker NZD might be served by surprising the market and not hiking in June."
Key Quotes
"The New Zealand growth outlook remains strong above trend. However, for tactical reasons the RBNZ may decide to skip the next policy meeting and slip into a more gradual tightening schedule."
"The most recent indicators since the last policy meeting, on balance, have been weaker than expected. Q1 inflation was much lower than expected, and the RBNZ has warned several times since its last meeting on 24 April that the dampening effects of a high exchange rate will lessen the need to hike rates."
"Furthermore, wage growth was lower than expected and unemployment remained elevated in Q1, suggesting near-term inflation pressure is modest. The high LVR mortgage restrictions have worked at least as well as the RBNZ expected in cooling the housing market."
"Milk prices have continued to edge lower since the RBNZ noted in its 24 April policy statement that they had fallen 20% from their peak in February."
"With an election on 20 September, spacing out the tightening cycle to miss June, hiking in July, and skipping the meeting 9 days before the election all make sense. The RBNZ's desire for a weaker NZD might be served by surprising the market and not hiking in June."