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11 Jun 2014
RBNZ: Looking for no change in the OCR - RBS
FXStreet (Bali) - RBS Strategists share their take on the RBNZ potential rate decision, noting that there are downside risks to NZD through the meeting.
Key Quotes
Immediately ahead is the RBNZ decision, and the consensus is largely expecting a 25bp hike by the RBNZ. We are against the consensus looking for no change. The RBNZ remains concerned about the strong currency and its potential pass-through to inflation, and first quarter inflation was softer than anticipated. At the same time, the RBNZ has noted that macroprudential measures have been more effective than anticipated in slowing the housing market, which may mean that the desire to hike interest rates to combat home price inflation has reduced. Dairy prices have fallen – the RBNZ noted this at their April meeting when they cautioned that dairy prices remain high but had fallen 20% from the peaks. Even in the event of a hike, we see the risks to the new forecasts and the signaling language as reflecting a more balanced, data dependent stance on monetary policy going forward. Thus, we see downside risks to NZD through the meeting, though perhaps better to express this through the crosses, such as long AUDNZD
Key Quotes
Immediately ahead is the RBNZ decision, and the consensus is largely expecting a 25bp hike by the RBNZ. We are against the consensus looking for no change. The RBNZ remains concerned about the strong currency and its potential pass-through to inflation, and first quarter inflation was softer than anticipated. At the same time, the RBNZ has noted that macroprudential measures have been more effective than anticipated in slowing the housing market, which may mean that the desire to hike interest rates to combat home price inflation has reduced. Dairy prices have fallen – the RBNZ noted this at their April meeting when they cautioned that dairy prices remain high but had fallen 20% from the peaks. Even in the event of a hike, we see the risks to the new forecasts and the signaling language as reflecting a more balanced, data dependent stance on monetary policy going forward. Thus, we see downside risks to NZD through the meeting, though perhaps better to express this through the crosses, such as long AUDNZD