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RBNZ to cut end of H1 - Westpac

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 21, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Guatemala) - Analysts at Westpac explained that there is stubbornly low inflation in NZ.

    Key Quotes:

    "This will be the key concern keeping policy makers at the RBNZ awake at night. Weakness in commodity prices, particularly oil prices, was a key contributor to the very low levels of inflation in New Zealand over the past year. Developments in recent months have highlighted the risk that this could continue to be a significant drag on imported inflation over 2016."

    "On top of this, retailers are reporting that competitive pressures mean that their ability to push through price increases is limited. Finally, growth in the population is helping to limit inflation in the labour market."

    "The above conditions, combined with a still gradual recovery in the global economy and slowing domestic growth, lead us to expect that the RBNZ will need to cut the OCR further over the coming year. But there is a question about when this will occur. The RBNZ has stated that they think the easing in policy to date will be enough to generate a sustained lift in inflation back to around 2%.

    However, we have our doubts. We expect that by mid-2016, the lingering softness in inflation and slowdown in growth will be apparent, and will prompt the RBNZ to cut rates again.

    We’d like to wish all our readers the best for the holiday period and the New Year. Our regular economic reports will resume in early 2016."
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