RBNZ: Cautious tone - ANZ

Analysts at ANZ point out that the Reserve Bank of New Zealand last week sounded a slightly more cautious tone about the future path for the economy and inflation than in their November projections, but only modestly so.

Key Quotes

“The implied first OCR hike was pushed out to mid-2021 from late-2020. The market was anticipating a more significant change in tone, perhaps influenced by dovish surprises from the US Federal Reserve and the Reserve Bank of Australia. This meant the NZD and interest rates spiked on the day, even though the surprise relative to most economists’ expectations (including ours) was small.”

“Our expectation for OCR cuts kicking off in November is built on a forecast that GDP growth will fail to accelerate over this year as the RBNZ is projecting, leading to the RBNZ in time concluding that more monetary stimulus is required. There is plenty of data between now and then to make or break our case.”