FXStreet (Delhi) - Charles St-Arnaud, Research Analyst at Nomura, notes that the RBNZ kept rates unchanged while shifting to a dovish policy stance, while it signalled no imminent rate cut. Key Quotes “The RBNZ kept its policy rate unchanged at 2.50%, as expected. However, the statement was more dovish than expected. The RBNZ stated that “headline inflation is expected to increase over 2016, but take longer to reach the target range than previously expected”. It also added that “some further policy easing may be required over the coming year to ensure that future average inflation settles near the middle of the target range, shifting to a dovish bias”. In its economic assessment, the RBNZ continues to say that “the domestic economy softened during the first half of 2015 driven by the lower terms of trade”, but added that “growth is expected to increase in 2016 as a result of continued strong net immigration, tourism, a solid pipeline of construction activity, and the lift in business and consumer confidence”. On the global economy, the central bank increased its level of concern, saying “uncertainty about the strength of the global economy has increased due to weaker growth in the developing world and concerns about China and other emerging markets”. It also acknowledges the increase volatility in financial markets. The RBNZ continues to expect further NZD weakness, saying that “further depreciation in the exchange rate is appropriate given the ongoing weakness in export prices”, but it acknowledged that the currency moved in the right direction by removing the reference to the recent appreciation. Overall, the message from the RBNZ is that it is gradually preparing for a rate cut. However, the need for a cut will depend on whether the NZD remains stronger than the central bank’s forecast, the potential for further declines in energy prices to push inflation expectations and headline inflation lower, global growth and uncertainty remaining high or increasing, and further declines in milk prices. While the policy stance has shifted to a dovish bias, we believe that a rate cut is not imminent and continue to think that the RBNZ will keep rates unchanged for some time. Nevertheless, we keep in mind that with the release of the Statement on Monetary Policy at the March meeting, the probability of a cut at that meeting is high.” For more information, read our latest forex news.