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15 May 2015
RBNZ to ease OCR despite stellar NZ retail sales - Deutsche Bank
FXStreet (Bali) - According to Darren Gibbs, Chief Economist New Zealand at Deutsche Bank, Thursday's stellar NZ retail sales report does not alter the bank's view that the RBNZ will ease the OCR by 25bps at the June and July meetings.
Key Quotes
"Turning to the RBNZ, today’s report does not alter our view that the Bank will elect to ease the OCR by 25bps at the June and July meetings. In considering the outlook for monetary policy, both demand and supply conditions need to analysed closely (the tendency is to focus mostly on the former, because the data is more frequent and observable)."
"As we wrote at the time we made our call, the rationale that we now see easing monetary policy is not based primarily on any concern about aggregate demand conditions facing the economy (although we have been getting more concerned about prospects for the rural sector in light of developments in dairy prices)."
"Rather, the rationale is that growth – as solid as it has been – has not been sufficient to tighten the labour market nor place any significant upward pressure on labour cost inflation."
"As a result, like us, we think that the RBNZ will be less confident that inflation will rise towards the midpoint of the Bank’s target range within an acceptable time horizon."
"A moderate policy easing, as continues to be priced by the market, would provide increased assurance, especially to the extent that it takes at least some pressure off the exchange rate."
Key Quotes
"Turning to the RBNZ, today’s report does not alter our view that the Bank will elect to ease the OCR by 25bps at the June and July meetings. In considering the outlook for monetary policy, both demand and supply conditions need to analysed closely (the tendency is to focus mostly on the former, because the data is more frequent and observable)."
"As we wrote at the time we made our call, the rationale that we now see easing monetary policy is not based primarily on any concern about aggregate demand conditions facing the economy (although we have been getting more concerned about prospects for the rural sector in light of developments in dairy prices)."
"Rather, the rationale is that growth – as solid as it has been – has not been sufficient to tighten the labour market nor place any significant upward pressure on labour cost inflation."
"As a result, like us, we think that the RBNZ will be less confident that inflation will rise towards the midpoint of the Bank’s target range within an acceptable time horizon."
"A moderate policy easing, as continues to be priced by the market, would provide increased assurance, especially to the extent that it takes at least some pressure off the exchange rate."