NZD: RBNZ cuts again - ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 10, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    James Knightley, Senior Economist at ING, suggests that in contrast to the Bank of Canada, the Reserve bank of New Zealand opted to cut rates 25bp with further easing possible.

    Key Quotes

    “The Reserve Bank of New Zealand surprised the market yesterday by cutting rates 25bp to 2.25%. The accompanying statement highlighted weaker external demand and the challenges for the domestic dairy industry, but acknowledged that domestic growth in aggregate wasn’t doing badly – helped by “inward migration, tourism, a pipeline of construction activity and accommodative monetary policy”.

    Nonetheless, given that the New Zealand dollar has appreciated and on a trade weighted basis is 4% higher than the RBNZ had projected in December and with inflation being described as “low”, the RBNZ stated that “a decline [in NZD] would be appropriate given the weakness in export prices”.

    They also suggested concern over falling inflation expectations and the likelihood that inflation would take longer to reach the target range means that “monetary policy will continue to be accommodative”, while “further policy easing may be required to ensure that future average inflation settles near the middle of the target range”. We now think that they will cut again in 2Q16.”
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