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RBNZ calls time on cuts…for the time being - BNZ

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Oct 29, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Bali) - RBNZ left the OCR unchanged at 2.75%, keeping its easing bias, notes Craig Ebert, Economist at BNZ, adding that a final 25bp cut in December is expected, but much now depends on the data.

    Key Quotes

    "Given recent history, we didn’t quite trust the Reserve Bank to resist pervasive pressure to cut its cash rate. We should have. To be clear, we think the Bank is doing the right thing here, in steadying its Official Cash Rate at 2.75%, after a string of reductions. This is even though we were 51/49 on the side of a final tweak lower for today’s meeting. We thought the Bank should hold fire today, but weren’t quite convinced it would."

    "Nor can we take any umbrage at the Bank’s only-moderate easing bias, which we infer from its commentary. Our take is that the RBNZ is doing its best to buy some more time, before potentially having to cut further. It’s still, at heart, a reluctant cutter, in our view, but is keeping its options open nonetheless."

    "Yes, there is the phrase in the last paragraph of RBNZ text that “To ensure that future average CPI inflation settles near the middle of the target range, some further reduction in the OCR seems likely.” Note the return of “middle”, with the Bank recently highlighting just “the range.” However, this was followed by “This will continue to depend on the emerging flow of economic data. It is appropriate at present to watch and wait.” So, while a maintained easing bias, it did not seem a strong or immediate one to us."

    "We will, however, keep with our 2.50% base call for the OCR, which we migrate over to the 10 December Monetary Policy Statement (MPS). But we wouldn’t want to hard sell it, from what the RBNZ has outlined today. A lot will depend on the data between now and the 10 December MPS."
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